Reports across the country of a severe shortage of currency and ATMs sporting ‘Out of Order’ boards have created some disquiet. The big problem areas are eastern Maharashtra, Bihar and Gujarat. Some cities too seem to be hit hard. Snaky, long queues in front of ATMs in Patna, Hyderabad, Bhopal, Surat, Varanasi and Delhi have set off a demonetisation-like panic. The RBI has reported that currency notes worth `18.17 lakh crore were in circulation a few days ago, around the same volume before demonetisation was announced in November 2016. Moreover, considering the significantly higher level of digital transactions, a cash crunch is indeed surprising.
The government, instead of giving a cogent explanation, has unfortunately adopted an ostrich-like attitude. Finance Minister Arun Jaitley took to Twitter claiming there “is more than adequate currency in circulation” and there was a “temporary shortage” because of an unusual spurt in demand for cash. With Jaitley failing to clear the air, various theories are doing the rounds. One claims that at this time of the year, there is a sudden spike in cash withdrawals due to the harvest festival; another theory says elections in Karnataka next month have created a run to stash cash for the crucial political battle. Then there are persistent reports of `2,000 currency notes being hoarded and disappearing from the system.
Beyond the confusion, what is clear is the government has been again caught napping. The telltale signs of the crisis were there. In Telangana and Andhra Pradesh, ATMs have been dry for over a month. Bihar, Karnataka, UP, Maharashtra and Rajasthan have reported more cash being withdrawn than deposited. The demonetisation crisis we went through should have made the government more alert to these signals. It’s unfortunate that the RBI and Union finance ministry have begun to scramble around only after there has been an outcry. The least the government can do is provide a truthful explanation of what has happened.