Is scrapping off 2K rupee notes good for the economy?

What happened?

The Reserve Bank of India (RBI) announced that it will withdraw the 2000-rupee note from circulation by September 30, 2023. The note, which was introduced in 2016 after the demonetisation of 500 and 1000-rupee notes, will remain legal tender until then. Citizens have been advised to deposit or exchange them at any bank branch.

Why it matters?

India's decision to scrap its highest denomination note has ignited a lively debate over its impact on the economy and society. Some applaud it as a crackdown on corruption and a push towards digital payments. Others view it as an admission of a failed policy, causing inconvenience for the public and cash-dependent sectors. The move also has implications for banking, bond markets, interest rates, and inflation.

What are the arguments from both sides?

Side 1: It’s a good thing!

• It completes the process of demonetization. When the 2000-rupee note existed in 2016, it was a temporary solution to restore currency flow after demonetization swiftly. But it was never intended to be a permanent fixture in the economy. By withdrawing it from circulation, the government will accomplish its goals of tackling black money and corruption.

• It will not affect ordinary people: The 2000-rupee note is not commonly used for transactions, as most people prefer smaller denominations or digital modes of payment. By phasing it out, the government can encourage more people to use bank accounts, cards, wallets, and other digital platforms for their payments.

• By removing the 2000-rupee note from circulation, the Reserve Bank of India (RBI) can effectively decrease the money supply and encourage a surge in demand for bank deposits. This strategic move can potentially lower interest rates, control inflation, and ultimately enhance the transmission of monetary policies.

Side 2: It’s a bad thing!

• The government is basically admitting that demonetisation was a blunder. Congress president Mallikarjun Kharge questioned if the “second demonetisation" is an effort to cover up the wrong decision made earlier. In 2016, the government rolled out the 2000-rupee note as part of a plan to eradicate black money and corruption from the economy. But most demonetised notes returned to the banking system, indicating that demonetisation did not achieve its intended goals.

• The widespread use of the 2000-rupee note, particularly in rural areas and small towns with limited access to banking and digital services, means that withdrawing it from circulation could lead to a cash shortage and disrupt economic activities. Many people may also face difficulties depositing or exchanging notes before the deadline.

• The 2000-rupee note symbolizes confidence and stability in the economy. Removing it from circulation could create uncertainty and panic among the public and investors, impacting consumer spending, business investment, and overall economic growth.

What Next?

The RBI has instructed banks to stop issuing 2000-rupee notes and provide deposit/exchange services until September 30, 2023. Citizens can visit banks to deposit/exchange their 2000-rupee notes. Some experts have recommended that the government should also take measures to improve tax compliance, transparency, governance, and digital infrastructure to curb black money and promote digital payments.

Why Is There So Much Hype Around ‘The Kerala Story’?

What’s Happening?

The release of the controversial film- ‘The Kerala Story’ has ignited debates on freedom of expression and hate speech. With critics pointing out factual errors and exaggeration of facts, ‘The Kerala Story’ has become the centre of political debates for the past few weeks. While some states like West Bengal have banned the film, others like Uttar Pradesh, Madhya Pradesh and Gujarat have made the film tax-free, enabling more people to watch it. So, why does such a difference of opinions exist about a film purportedly based on a true story?

Why it matters?

The filmmakers have claimed that the movie is inspired by true incidents and tells the story of women coerced into converting to Islam to join the Islamic State. They argue that this is not an isolated case but a symptom of a larger problem of Islamic radicalization in India. While it is important to acknowledge that instances of forced conversions and religious extremism do exist, it is also important not to demonize a community for the actions of a few.

What are the arguments from both sides?

Side 1: The Movie is inspired by true events

• The filmmakers have said that the movie is inspired by a case of 21 people from Kerala who left India to join the Islamic State in 2016. Adah Sharma, who plays the film's protagonist, has said that the filmmakers have interviewed survivors, experts, journalists and officials who have witnessed or investigated the cases of women who were converted and recruited by the Islamic State in Kerala.

• They’ve claimed that the movie is not against Muslims but against radical Islam and practises like ‘Love Jihad’- a term loosely referring to forced conversions through marriage. Organisations like PFI have been repeatedly accused of “brainwashing” Hindu women and marrying them off to Muslim men. The filmmakers have alleged that no one talks about the stories of these women, and the Kerala story does precisely that.

• The filmmakers have the right to use their artistic license to shape the story to enhance its impact and appeal. Restricting this would violate the principle of freedom of expression. A ban on the movie, like the one enforced by the West Bengal government but later paused by the Supreme Court, would create a dangerous precedent for future movies that challenge the status quo or explore sensitive issues.

Side 2: The Movie is Hateful

• Critics have pointed out that the movie crosses the line and promotes a conspiracy theory that all Muslim men are radical and are on a mission to convert non-Muslim women by baiting them into marriage.

• ‘The Kerala Story’ is the latest film that demonizes Muslims and Islam in India and incites communal hatred and violence. For example, movies like ‘The Kashmir Files’ and ‘Tanhaji’ have also portrayed Muslims as invaders, villains and enemies of Hindus and India. These movies have distorted history, spread misinformation and promoted Hindu nationalist propaganda. These movies have also provoked protests, threats and attacks by Hindu extremist groups against Muslims. After the release of The Kerala Story, communal clashes erupted in Maharashtra, leading to the death of one man and injuries to eight others.

• The movie’s allegation that India is a fertile ground for recruiting foreign fighters for the Islamic State is wildly exaggerated. Several reports and research papers like the one from ORF have shown that despite India having the third largest Muslim population, India has very low recruits to the Islamic State. According to the US State Department, only 66 known Indian-origin fighters were affiliated with the IS as of November 2020. And India’s own NIA said in September 2021, it arrested and stated that only four women from Kerala who joined the IS were in jail in Afghanistan.

What next?

The movie has garnered significant attention with some states banning it and others making it tax-free. The high-pitched political debates on social media, op-eds in newspapers, and TV channels only bolstered the movie's box office collections. Even the Supreme Court has placed a stay on West Bengal's ban on the movie. Based on the current trends, the movie will remain in theatres for a considerable time.

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Should Pakistan’s Crisis Worry India?

What happened?

The arrest of former Prime Minister Imran Khan on corruption charges has ignited violent protests throughout the country, leading to political and economic turmoil. While Khan was subsequently released on the order of the Supreme Court, the situation has compounded Pakistan's existing challenges of high inflation, sluggish growth, and an impending debt crisis. As Pakistan's neighbouring nation, should this crisis raise concerns for India?

Why it matters?

India's relationship with Pakistan has experienced significant strains in recent times. In 2019, the tension between India and Pakistan reached its highest point in three decades following a militant attack on Indian troops in Kashmir. This incident led to cross-border airstrikes and brought the two nations to the brink of a severe escalation. While a subsequent border truce has somewhat alleviated tensions, Pakistan remains discontented with the abrogation of Article 370 in Kashmir, keeping the situation in a fragile state. Given India's stake in regional stability and security, any escalation or spillover from Pakistan's crisis could jeopardize Indian interests and disturb peace in the region.

What are the arguments from both sides?

Side 1: India should be concerned

• Pakistan's internal chaos might divert its attention from managing militant groups that target India, potentially creating a power vacuum that extremist or external elements could exploit.

• Some experts cite the past as a possible signifier of why India should be worried. Political chaos in Pakistan was a big reason behind its war with India in 1971. And in 2008, Pervez Musharraf's electoral defeat had a consequential aftermath when militants from Pakistan orchestrated the brutal Mumbai attack.

• The current turmoil could derail the recent border truce and raise the risk of a military confrontation. The Pakistani army, known for interfering in politics and supporting anti-India militants, may exploit the crisis as a diversionary tactic and provoke India along the Line of Control (LoC) in Kashmir. This could escalate into a full-scale war, with the added threat of nuclear weapons being employed.

Side 2: India shouldn't be concerned

• Pakistan's challenges are primarily internal, and the likelihood of spillover is low, given that both countries are interested in avoiding a catastrophic war.

• The crisis may weaken the influence of the Pakistani army and intelligence agencies that have historically been hostile toward India. The unrest has exposed divisions within the military establishment and its lack of popularity among the public. Consequently, their ability to interfere in politics, foreign policy and support anti-India militant groups could diminish.

• The crisis may encourage Pakistan to seek economic assistance and cooperation from regional partners, including India. As a significant regional power and emerging global player, India could offer Pakistan trade concessions, investment opportunities, and humanitarian aid. In return, confidence-building measures and cooperation on security issues could be expected.

What next?

While the Supreme Court's decision to release Imran Khan has temporarily alleviated tensions in Pakistan, it has not resolved the underlying political conflict between him and his rivals. Khan remains committed to his anti-corruption campaign, while the government intends to rearrest him soon. The protests have subsided for now, but the situation remains unpredictable and volatile. Future developments will determine the course of Pakistan's crisis and its potential impact on India.

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