The Indian government announced a plan to take all of the old 500-rupee notes out of circulation. The government said that it wanted to stop corruption; 500-rupee notes were often used for bribery, and new notes would help prevent people from paying off officials. They also put limits on the amount that Indian citizens could take out of a bank on any day – 2,000 rupees.
We saw this graffiti on the side of a wall in Cochin. It stayed with me for the whole trip, because, in thinking about politics in America, I’m often reminded that “Politicians always have two reasons for doing something: one that sounds good and the real one,” and, “Men use thoughts to justify their actions, and words to conceal their thoughts.” Fighting corruption is a good thing, and it is a problem…but for some reason, this seemed too clean to me, too simple. NOTHING in India is simple. The thing was, I didn’t know enough about Indian politics to even begin to theorize on what the REAL reason might be for the changes.
On our last night, we had dinner with political activists, artists, filmmakers, and writers. While talking to them, we mentioned that the monetary reforms sounded good…but I was skeptical that it was done to fight corruption.
“OH!” one said. “Everyone knows, but few people will say it out loud. First, the Indian banks are severely undercapitalised, so they need to get and keep more money in reserve. Many Indians don’t have bank accounts, so they just keep cash, and a lot of rupees are held outside of the official system. By making people deposit their bills in order to get new notes, and then limiting how much they can take out, the government is able to capitalise the banks.
“The reason the banks are all undercapitalised is that they give massive loans to the friends of the Prime Minister, and the loans are never paid back. The government decided that the best way to help was to fix the system; take money away from citizens, and use it to give loans to the rich. Now, they’re giving more loans to the same people, so the system is just going to collapse soon.”
I’m not sure if she’s right, but that explanation somehow made much more sense to me.