In all of India's economic history, it's hard to find anything quite as indefensible as demonetisation. In fact, its irrationality is world-beating - Narendra Modi promised to put us on the world map, and he has - just not the way we expected. Even bad economic policies, most of the time, "succeed" in some way or the other - they may achieve some of their aims, even if at a very high cost. It's truly rare to come across a policy that fails on every possible yardstick, including those imaginatively invented well after the decision was taken.
But demonetisation seems to have achieved this near-impossible feat. Of course it didn't wipe out black money. We know that now the RBI has confirmed that 99.3 per cent of the demonetised cash was returned. No giant windfall gains accrued to the government thanks to people refusing to return cash. Gautam Adani or Anil Ambani did not have to stand in ATM lines to withdraw spending money. The growth of digital payments has not seen a structural, sustainable increase. People are still throwing stones in Kashmir. And morally, I doubt that we are a significantly more honest nation now than we were on November 8, 2016.
It's true that Arun Jaitley and others repeatedly stress that direct tax revenue has increased sharply - but they compare this to the NDA's poor performance in the two years prior to demonetisation. Go back a little further, to 2013-14 or 2010-11, and the growth in direct taxes over the past two years doesn't seem unusual at all. In fact, as NIPFP's Rathin Roy, a member of the PM's Economic Advisory Council, has put it, "the growth and buoyancy of direct tax revenue in the 2014-17 period is lower than in any sub-period this millennium." This is just another example of the government choosing its base years cleverly in order to claim incredible success.
It may be natural, now, and look back at all those pathetic attempts to rationalise or defend an obviously irrational step with contempt. But spare some pity for all the columnists, economists, CAs and assorted experts who were convinced that, after all, any decision must have some positive fallout if they could just find it. How were they to know that this was that one special policy which would actually have nothing good about it at all? Let me confess that I was among them: while thinking that demonetisation was an awful step, I thought it would at least get people to put more of their money in banks. But, as the RBI also confirmed this week, Indian households are holding more of their savings in cash and not less. In fact, they haven't held this high a proportion of cash for six or seven years. So, yes, I was wrong. I assumed that taking people's cash away meant they would not want to hold so much cash again. But in retrospect, it seems obvious that in fact it is now banks that people will not trust, and not cash. I guess that's what happens when you tell them that they don't have access to their own accounts any more unless they stand in lines longer than first-day-first-show at a Salman Khan movie.