Of money good or black, digital or paper

500 and 1000 Indian rupee banknotes are kept in front of an image of the Hindu deities at a cash counter inside a bank in Jammu, November 10, 2016 REUTERS/ Mukesh Gupta

The decision by the BJP government on 8 November to demonetise the 500 and 1,000 rupee currency notes has been presented as “strength in the fight against corruption, black money, money laundering, terrorism and financing of terrorists as well as counterfeit notes”.

The release added: “Prime Minister Shri Narendra Modi made these important announcements during a televised address to the nation on the evening of Tuesday 8th November 2016. He said that these decisions will fully protect the interests of honest and hard-working citizens of India and that those five hundred and one thousand rupee notes hoarded by anti-national and anti-social elements will become worthless pieces of paper.”

Rs 14 lakh crore – 86% of the value of Indian currency currently in circulation – became useless from midnight of November 8, 2016. The Rs 500 notes amount to Rs 7.85 lakh crore and Rs 1,000 notes amount to Rs 6.33 lakh crore, according to Reserve Bank of India data. The immediate result was panic, in hundreds of towns and cities, as citizens ran for ATMs. Confusion prevailed as on the next day, 9 November, all banks were to shut to the public and ATMs too.

There was chaos outside hospitals, railway stations and petrol pumps which were allowed to accept Rs 500 and Rs 1,000 notes till Friday (but interpreted the directions as they pleased). Smaller denomination notes such as Rs 100 and Rs 50 were in short supply due to the heavy demand. Small traders, rickshaw pullers, taxi and auto-rickshaw drivers, daily wage labour, and unorganised sector workers said they have been hit hard.

This public inconvenience was necessary, said the government, to have the time to restock bank branches and ATMs with new currency notes and to prepare the bank branches for the exchange services they would have to begin on 10 November.

The government explained that:

1. A law was passed in 2015 on disclosure of foreign bank accounts. In August 2016 strict rules were put in place to curtail benami transactions. During the same period a scheme to declare black money was introduced. These efforts have over the past two and a half years, brought more than Rs. 1.25 lakh crore of black money into the open.

2. These efforts have led to India emerging as “a bright spot in the global economy”, a preferred destination for investment and an easier place to do business in. “Leading financial agencies have shared their optimism about India’s growth as well.”

3. Indian enterprise and innovation has received a fillip due to the ‘Make in India’, ‘Start up India’ and ‘Stand up India’ programmes for enterprise, innovation and research in India.

There is no doubt that India’s economy has been plagued by the creation of wealth in some quarters that is obscenely disproportionate to the stated sources of individual and family income (see the press release from the Department of Economic Affairs, pdf). This has for long signalled corruption, and the means by which the corrupt (both giver and taker) become so is cash (but not only). The demonetisation has affected the political class and bureaucracy which accounted for the bulk of the corrupt money. The other difficulty the government and enforcement agencies have grappled with especially over the last decade is counterfeit currency notes, which have been used to maintain anti-national, secessionist and terrorist networks.

With about 86% (by rupee value) of currency in circulation being in the notes that have been demonetised. There are 16.5 billion Rs 500 notes and 6.7 billion Rs 1,000 notes in circulation now, and replacing them with lower denomination notes, and also the new series of Rs 500 and Rs 2,000 notes, will take several weeks.

Old high denomination bank notes are seen kept in buckets at a counter as people stand in a queue to deposit their money inside a bank in the northern city of Kanpur, India, November 10, 2016. REUTERS/Adnan Abidi

I have several concerns about the demonetisation of the 500 and 1,000 currency notes, and the accompanying directions that the banking and financial services sector in India is now pushing the public.

Question 1 – Estimates are that currency in public circulation in 2006 was around Rs 4 lakh crore. In 2016 it was about Rs 16 lakh crore. If this estimate is of what RBI printed, why did it for ten years print physical currency at a rate higher than top annual GDP growth estimates?

This article explains the extraordinary rise of cash economy through high denomination notes, powered by generation of black money in real estate, stocking of gold, bribery and corruption. But it does not help answer my question above. “While the high denomination notes made illegal businesses, including hawala transactions to transfer money out of India easy to execute, it has facilitated huge tax evasion even in the otherwise lawful businesses. High denomination notes have made it easy for the bribe taker to handle huge bribes with ease.”

Question 2 – As the 500 and 1000 notes are ‘high value’ and so used for hoarding ‘black’ cash, why is the higher of the two (1000) being replaced by a note twice its value, that is, Rs 2000?

Since yesterday, there have been explanations offered about the effect of demonetisation on consumption and on slowing down an economy whose GDP growth is rated as the best amongst the large economies. “Consumer spending will likely fall in the immediate weeks as households adjust to the new system. India’s economy grew 7.1 percent during April to June, the slowest in 15 months, but the government and experts have been pointing out that a pick-up was likely in the next few months riding on good rains, a pay bonanza for government employees and festive-season buying.”

According to the national income data for the first quarter (April-June) of 2016-17, private final consumption expenditure (PFCE) – which measures household spending – at current prices is estimated at Rs 21.19 lakh crore, or about 55% of the gross domestic product (GDP). These are the numbers that a new class of ‘growth’ advocates in India are betting on. There is a connection to inflation – in the price of services, cost of manufactured articles and the prices of food – which however has not been answered as yet. Raising the denomination of the highest value currency note from Rs 1,000 to Rs 2,000 is in my view such a signal.

A person stands with his documents in a queue outside a branch of the State Bank of india as people wait to exchange old high denomination bank notes in Old Delhi, India, November 10, 2016. REUTERS/Cathal McNaughton

A number of petitions challenging the notification by the Department of Economic Affairs, Ministry of Finance, Government of India (which is the order for demonetisation) have been lodged at various High Courts and with the Supreme Court. Some protest the order as “illegal and arbitrary” and others for the order not granting reasonable time for ordinary citizens (presumably with legitimate cash in hand) to comply without jeopardising livelihood (by having to spend time in bank branches, for which leave is to be taken or a day’s income has to be foregone). While the Supreme Court may hear a petition next week, the response of the Madras High Court – that it cannot interfere in the policies of the government related to monetary system – should help prise open to greater public scrutiny one of the most opaque areas of policy making: the public monetary and fiscal system.

Question 3 – Is the net monetary gain by Government of India – more physical money from the ‘black economy’ brought onto the national accounts books – a way to ensure that India will next financial year also record the ‘fastest GDP growth’ (without the manufacturing, service and agriculture sectors doing so)?

For this question I can see only a few partial answers. These have to do with the enlargement of the digital rupee and digital payments, and this is the most serious concern. A government-appointed panel was set up in August to suggest ways such as tax rebates and ‘cash back’ to incentivise card and digital transactions. The government is also examining the feasibility to create a history for all card and digital payments, how to use the Aadhar database for authenticating card/digital transactions, providing low-cost micro-credit based on credit history.

Another partial answer comes from the Ministry of Finance, which said that “weak global demand” is among the “strongest challenges” in the near term for Indian economy. “Weak global demand is one among the strongest challenges in the near term. Exports and imports together constitute 42 per cent of the GDP (gross domestic product), even at the reduced levels in 2015-16.” The ministry said that reviving the savings and investment cycle in economy is challenging. The savings rate that stood at 34.6% in 2011-12, declined to 33% in 2014-15. Investment rate declined from 39% of GDP in 2011-12 to 34.2% in 2014-15. So these are the conventional macro-economic arguments, but the demonetisation will as I see it push any revival in savings and investment in quite a different direction from what the rural and agricultural base of the population require.

That direction is the ‘cashless’ one, with cash being blamed for fuelling the black economy. This is a danger-filled direction, one which we have already had a troubled history to look back at recently – the micro-credit bubble of the 2000-10 decade – to serve as a guide of what not to do. The banking and financial services industry has been expanding over the last two years, in tandem with the mobile telecom industry, with mobile payments and ‘wallets’.

“You cannot have 12% of India’s GDP in shape of currency,” Finance Minister Arun Jaitley has said. “Ideally developed countries have only about 4% and therefore you have to squeeze the amount of currency available and you need to get people into the habit of using digital, cheques, plastic currency and so on.” This – apart from the short-term gain by herding cash hoards into banks to be taxed – is what the direction is: the rupee as a bit, the rupee’s already tenuous basis in a physical standard now becoming more virtual, and this in a monetary and fiscal environment about which the public has scant understanding and in which the public has no participation.

Such a direction only widens the already troublesome gap between an acceptable physical basis for a value that the rupee represents (we have no gold standard, or any other acceptable equivalent) and the assigning of a notional value to a digital rupee whose issue, transfer and control will be entirely electronic. When viewed against the increasing “liberalisation” (or increasing “reforms”) of the banking, insurance, non-banking finance, financial services, small credit industries that has taken place in the last two years, and especially the opening up of these new services to foreign direct investment (FDI), the picture of the cashless economy so strenuously advocated by Finance Minister Arun Jaitley.

Consider this gleeful reaction from what is called the fintech sector (we had IT, BT and there’s FT): “We might grow 10x when it comes to digital payments. Today, three to five percent of the transactions happen digitally, but we will see a 10x growth to almost 15–20% when it comes to digital transactions in the country. This is huge and this rise in digital transactions will lead to a digital exhaust where better credit risk scoring will happen, catapulting into exponential growth.”

This is the very troubling new landscape that the demonetisation decision – taken with the good reason of weeding out a black economy – has brought the rupee into.

The origins of spiritual agriculture, 1

Our Hindu scriptural references provide a spiritual and dharmic basis for agriculture and for the harvesting, distribution, and the consumption of food. This article follows my earlier writing on the subject, ‘Old krishi for new Bharat’ (part 1 of the krishi series), and ‘How we almost lost our growing tradition’ (part 2). This article was written for the Indic and Indology study website Indiafacts.

“Without any foes in the world, their [farmers’] aim is [carrying out] plans of others; beaming with tender love of all the animal class, they are experts in ‘just’ thinking.” From the text on farming called ‘Kashyapiyakrishisukti’, written around 800 CE.

“Pressed (by men at the helm of affairs) in the words ‘Let food be given again and again and (also) article of wearing apparel of various kinds’ many men in that sacrifice did as they were told (freely gave away food and raiment). Numerous heaps, resembling mountains, of rice cooked from day to day in the traditional way were seen on that occasion on the sacrificial grounds. The men as well as the hosts of women that had arrived from different lands were fully entertained at that sacrificial performance of the high-souled emperor.”

Early in the Valmiki Ramayana is the description of the great ‘asvamedhayajna’ of Raja Dasaratha, which required the preparation of the ‘yajna’ grounds on the northern bank of the river Sarayu that flows alongside Ayodhya.

This passage, from canto 14 in book one, the Bala-khanda, of the Srimad Valmiki Ramayana, is one of several in the Bala-khanda which describes the principles of the offering of food, with reverence and honour, with the care that the dignity of the receiver is maintained. The scale of Raja Dasratha’s ‘yajna’, with vast complexes having been built to accommodate the multitudes of visitors, huge cantonments having been constructed for the visiting rajas and their armies, also gives us some indication of the quantities of food that were required, cooked freshly and traditionally, served with care, and to the satisfaction of all.

The Srimad Valmiki Ramayana has been described as an epic that begins with the description of one great ‘yajna’, that of Raja Dasratha’s, and which concludes with the description of another great ‘yajna’, that of Lord Sri Rama’s. These are two great ‘annadanas’, the giving of food. While the ‘yajnas’ involve great ritual and recitation by the assembled priests and scholars, in both, the continuous activity that occurs throughout is the ‘annadana’, for all of the multitudes present – whether a great brahmana with hundreds of followers, whether a visiting raja’s army, or whether ‘tapasvins’ (those who practice penances), ‘sramanas’ (those who undertake austerities), ordinary folk, the old, the women and children – are tired and/or hungry. This indeed is one of the important lessons to be found in the Srimad Valmiki Ramayana and when considered closely, it reveals the centrality of ‘annadana’, the giving of food, and therefore that of the creation of food, its cultivation.

Thus, we find that the sages of Bharat, in their advice and counsel to the rajas, insisted upon the protection of ‘varta’ (which included agriculture, animal husbandry, and trade), with a special focus on the cultivation of crops. When the sage Narada, for example, visited Raja Yudhishthira, his concerns were very much more than ordinary (Mahabharata Sabhaparva, the second parva, chapter 5). In a series of questions, which are not couched in an interrogative tone nor are they in the form of any lofty diktat, but which combine simplicity and sound statecraft (among the essences of the Mahabharata), Narada asks:

“Have you had big water ponds constructed everywhere in your realm? Agriculture cannot be done only on the hope of good rains.”

“I hope that the farmers and the workers of your realm are not unknown to you. Are you aware of what they do? Are they happy with you? Their happiness is one single cause of social prosperity.”

“I hope that the crops and the seeds of farmers in your realm are not wasted. Do you do good to each farmer by giving him loans on one percent interest for agriculture?”

Likewise, in the Anushasanaparva (the thirteenth parva) of the Mahabharata, Bhishma pitamaha, instructs those gathered around him, thus:

“The absence of food makes the five principal elements of the body disintegrate, and with the loss of food, the strength of even the strongest is lost.”

“Food is man’s life and it is through food that the living beings are born. The whole world is based upon food. And therefore food is regarded as the highest.”

No advice that had travelled through the eras, sustained by the webs of knowledge that extended between the federations of gramas and the learning sanctuaries of the ‘mathas’ attached to mandirs large and small, was ever too inconsequential to be discarded.

The Mahabharata speaks simultaneously of ‘annadana’ and ‘jaladana’, for the giving of food and water alike are regarded as the greatest of all sharing in life. There are detailed instructions on the giving of water (by constructing ponds, wells and reservoirs). Earth (‘bhoomi’) and trees (‘vriksha’) being inseparable from ‘anna’ and ‘jala’, the Mahabharata instructs ‘bhoomidana’ and ‘vrikshadana’ – the giving of fertile land upon which to grow crops, and the planting of trees – as essential for sustenance and nourishment of all.

This illustrates the consideration given by both the Ramayana and the Mahabharata to the cultivation of the crops, so that food may be obtained, given and consumed. In both our ‘shruti’ and ‘smriti’ are to be found a number of references to food and its cultivation, the manner of its use, its place in the scheme of material things. The Chandogya Upanishad contains a series of discussions on the material basis of life, with the ultimate basis being Brahman. They have stressed the importance of food in the nourishment of the mind. Uddalaka demonstrated this to his son Shwetaketu in quite a practical fashion, when he asked his son to do without food for a fortnight (subsisting on water only) and thereafter to recite the Veda, which Shwetaketu could not do, since, his mental faculties were considerably weakened. These he later regained after eating food. Uddalaka, further, repeated the lesson once more, this time proscribing water as well! Similarly, in other Upanishads, such as Brihadaranyaka, Kaushitaki, and Aitareya, there is to be found an emphasis on ‘prana’ as energy, which flows in many channels in the body, which, like the mind, is to be nourished by food.

Thus, our Hindu scriptural references provide a spiritual and dharmic basis for agriculture and for the harvesting, distribution, and the consumption of the food. Even as our civilisation passed through many alternate periods of prosperity and disruptions, the fundamental religious and cultural values have remained more or less the same to this day.

The archaeological and paleo-botanical investigations that have been carried out, since the early nineteenth century – using methods which have helped to both redraw the civilisational map and assign dates earlier than was previously done – have shown that domestication of cereals and pulses certainly occurred around eight millennia before the so-called ‘common era’ began (in the Gangetic plains, in the regions that correspond to the Saraswati-Sindhu settlements, and also in the Deccan, home to an abundance of millet varieties).

From the age of Sri Rama of Ayodhya till about the time that the kingdoms of northern and Gangetic Bharat began to be absorbed by the great Nanda empire of Magadha, the precepts concerning the cultivation of crop, and of the centrality of ‘annadana’ (and ‘jaladana’) took hold in practice and in institution through the cooperation of three kinds of institutions, whose connections were maintained until the later medieval period in Bharat, after which the interlinked support they provided for dharmic agriculture began to slowly crumble. These institutions were the state, which is the kingship and a form of enlightened administration, whose intricacies and nuances were so minutely and authoritatively compiled and enlarged by Kautilya, the ‘gramas’ or the villages and their farmers (“It is indeed the cultivators, who carry the burden of the King on their shoulders,” Bhishma had advised), and third, the mandirs and their associated ‘mathas’ as seats of learning and influencers of socio-economic conditions.

The Puranic list refers to the Pauravas, Aikshvakus, Panchalas, Kasis, Haiahayas, Kalingas, Asmakas, Maithilas, Surasenas and Vitihotras. Together with Magadha flourished the Kosala and Vatsa kingdoms. There were Avanti, Videha and Anga. From those eras (typically called the Vedic and later Vedic) and into the ages of imperial dynasties for both Uttara and Dakshina Bharat, it is the relatively less commented upon, quite inconspicuous, sparsely documented, but extremely influential ties between ‘grama’ (and kisan), state (in the form of a ‘kalyana raj’), and mandir (the fabric that maintained dharmashastric society), which weaved closely to the ancient injunctions about cultivation, food and the responsibilities of individual and king alike. From the Mauryas (300 to 185 BCE), the Sunga, Saka, Kushan, Satvahana, Vakataka, Pallava, Pandya, Gupta, Harshavardhana, to the Karkota, Pala, Pratihara, Chalukya, Rashtrakuta, Yadava, Chola, Hoysala, Kakatiya and Rajput, these ties were responsible for maintaining at a high level the wide set of sciences that supported what we today call krishi, but which had meant very much more, when known as the ‘varta’ of the Vedic age.

The old ‘Hindu rate of revenue’ had indeed been laid down in the dharmashastra, and was one-sixth or one-eighth or one-twelfth the produce, and the latitude provided as to the proportion of collection derived not from the strains of maintaining a treasury or the considerable costs of a standing army, but from the climatic conditions and the ability of the ‘gramas’ to bear payment. If the rulers of southern Bharat at times claimed a share even as large as half the produce, they made continued improvements in cultivation possible by excavating and maintaining vast irrigation works at their own cost (this indeed was the agrarian base of the economy that supported the great eastward seaborne excursions during the Chola period, with Suvarnadvipa, the modern archipelagic Indonesia, becoming Hindu in rule and socio-religious practice) and took their share in kind, not in money.

That there was a steady, incremental and appropriate technology surrounding cultivation is seen from the export, during the eras of the Satvahanas (around 40 BCE to 220 CE) and the Kushans (78 to 144 CE), of steel weapons and cutlery to western Asia, where they enjoyed high esteem. That esteem was due in no small measure because of the widespread manufacture of sturdy agricultural implements: hoes of varying lengths, sickles with variations in both blades and handles for different purposes, and true spades (these found in Takshashila) are testament to how advanced this technology was. As with discoveries of such implements in other places, such as in Sanchi, their workmanship indicates how advanced ironmongery was at the time. There is also the reassurance that our kisans, like their lines of ancestors stretching back into those storied eras, valued the engineering utility of a well-designed implement by continuing to make and use it: the ‘bhakhar’ (a blade-harrow) that even in the 1980s was in use in the black cotton soils of Madhya Bharat has been employed in the same form for centuries.

Farmers create for us the recurrence of food, which in the words of Bhishma in Anushashanparva, is the manifestation of the primeval being. They carry knowledge, they share the burden of the Raja and make the ‘annadana’ possible.

In the Arthashastra – that inexhaustible compendium of counsel, example, regulation and precept – there is a mention of the suitability of different crops for cultivation, according to rainfall: “Hence, according as the rainfall is more or less, the superintendent shall sow the seeds, which require either more or less water. ‘Sáli’ (a kind of rice), ‘vríhi’ (rice), ‘kodrava’ (kodo millet), ’tila’ (sesamum), ‘priyangu’ (panic seeds), ‘dáraka’ and ‘varaka’ (the medicinal plant variety phraseolus trilobus) are to be sown at the commencement (púrvávápah) of the rainy season. ‘Mudga’ (black gram or black lentil), ‘másha’ (green gram or mung), are to be sown in the middle of the season. ‘Kusumbha’ (safflower), ‘kuluttha’ (horsegram), ‘yava’ (barley), ‘godhúma’ (wheat), ‘kaláya’ (leguminous seeds), ‘atasi’ (linseed), and ‘sarshapa’ (mustard) are to be sown last” (Book 2, Chapter 24, ‘Arthashastra’ translation by R Shamasastry). No detail was too small to be excluded, no advice that had travelled through the eras, sustained by the webs of knowledge that extended between the federations of gramas and the learning sanctuaries of the ‘mathas’ attached to mandirs large and small, was ever too inconsequential to be discarded.

By the end of the period normally taken to be that describing ancient Bharat (the repulse of the first Arab invasions at the start of the eighth century, followed by the fall of Hindu Kabul in 870 CE, as R C Majumdar has written in volume four of ‘The History and Culture of the Indian People’), the sciences upon which rested the practice of our agriculture, and the dense, inherited cascades of knowledge concerning the material, astrological and spiritual schema of our agriculture had been well maintained. It was recognised that while different districts grew principal crops, this never implied that farmers were growing these mainly. A diversity of crops (cereals, legumes, vegetables both leafy and tuberous, fruit) implied good consumption, good trade and moreover a good basis with which to fulfil the ancient injunction on ‘annadana’.

Our farmers’ cropping seasons were mainly divided into two (with the sowing-to-harvest cycle overlapping the six climatic seasons). Agricultural life has from its earliest organised emergence in Bharat (and Bharatvarsha) been cyclical, based on the luni-solar calendar as calculated for region and province. According to the prevailing calendar, agricultural work is planned and carried out, which in turn informs and guides the cultural practices. The diversity of crops, the characteristics of the land, the practices of cropping, the Devas and the Devis, who presided and the rituals that were to be observed for them, these were the cornerstones of agricultural life.

In most parts of Bharat, the agricultural calendar was (and there are calendric holdouts still to be found) divided into fortnights punctuated by new moon days (‘amavasya’) and full moon days (‘purnima’). The rainfall pattern of these periods was carefully observed and recorded and cropping plans were made on these meticulously maintained records. Proverbs and sayings came to be coined in order to encode and ease the transmission of such climatological and meteorological knowledge. Thus, our agriculturists’ calendars included the 27 ‘nakshatras’ and the months (jyestha, ashadha, shravana and so on) that they corresponded with major festivals – with each month containing one major festival. This remarkable arrangement was noted even as recently as the 1940s in the last of the provincial gazetteer series of British India. The festivals contain scientific principles related to the management of agricultural lands, management of water resources, and the essence of sustainability, and the festivals help valorise the vast experiential knowledge webs of the farmers.

Farmers create for us the recurrence of food, which in the words of Bhishma in Anushashanparva, is the manifestation of the primeval being. They carry knowledge, they share the burden of the Raja and make the ‘annadana’ possible. What qualities must they have then? The sage Kashyapa, while dealing with the environmental and spiritual aspects of cultivation in his text on farming called ‘Kashyapiyakrishisukti’ (written around 800 CE), describes the character of farmers, thus:

“[The production of] grains and other vegetation are the sole purpose for highest fulfilment of the earth. The rich earth full of vegetation is the cause of growth of living beings.”

“They [farmers] are devotees of cow, earth, and gods; they are absolutely truthful in speech, intent on being agreeable to others, and always contented in mind.”

“Without any foes in the world, their [farmers’] aim is [carrying out] plans of others; beaming with tender love of all the animal class, they are experts in ‘just’ thinking.”

This affords us a glimpse into the spiritual and scriptural underpinnings of the activities, which we have only recently started to call ‘agriculture’, but which held much greater meaning as ‘varta’ and the more familiar ‘krishi’, because of their inherent connection to ‘annadana’. These are the ancient roots of our bonds with bhoomi, ‘panchabhutas’, and ‘annadana’.

A discussion about the factors that led to the longevity of the tripartite system, which enabled ‘varta’ to function so well for so many centuries, the harmonious interdependence between the prescriptions under Ayurveda for maintaining health and the produce of spiritual cultivation that provides such substances (such as the ‘sali’ families of rice mentioned in the Arthashastra), the assault on the ‘grama’ during the eras of occupation of Bharat by foreign powers, and the much more recent displacement of our spiritual agriculture by what is today called ‘agro-ecological’ and ‘organic agriculture’, follow in the next article.