They say that to engineer and execute a major economic stunner, you need a few Guja ratis. While the Gujarati connection of Prime Minister
Narendra Modi and current RBI governor,
Urjit Patel, is quite evident in the ongoing demonetization drive, three Gujaratis had executed a similar surgical strike on black money, 38 years ago, in 1978.
The new Janata party regime led by PM
Morarji Desai
had just stormed into power riding on the popular wave against corruption and nepotism of the Indira Gandhi-led Congress party soon after the Emergency. On January 16, 1978, Union finance minister H M Patel, went on air at 9 am to announce demonetization of Rs 5,000, Rs 10,000 and Rs 1,000 notes.
H M Patel was a native of Dharmaj in Anand. Then Prime Minister Morarji Desai belonged to Bhadeli in Valsad, while the then 14th RBI governor, I G Patel belonged to Palana village in Gujarat's Kheda district -the same place from where the current RBI governor, Urjit Patel's family , hails. Interestingly, both these RBI governors had to execute the task of demonetization within two months of assuming office.
A striking similarity between the two demonetization drives is that both took off just a few months prior to assembly elections in seven states.
Back in 1978, there were elections in AP , Arunachal Pradesh, Assam, Karnataka, Maharashtra, Meghalaya and Mizoram, starting from June 1978. The current demonetization drive is taking place when there are assembly elections scheduled for Goa, Manipur, Punjab, Uttarakhand, UP , Gujarat and Himachal Pradesh starting in 2017.
In his memoirs, 'Glimpses of Indian Economic Policy', I G Patel admits that he went along with demonetization `reluctantly'. Patel claims in his book that he had pointed out to the finance min ister H M Patel that “People who have black money on a substantial scale rarely keep it in cash.“ The present RBI governor, Urjit Patel, restricted himself by saying, “RBI has been concerned about the growing menace of fake Indian currency notes which has been increasing in numbers.“
In Gujarat, during the two days of the 1978 drive, Surat had emerged as the district with the highest deposits of demonetized notes.
An SBI bank official is quoted in a TOI report (March 10, 1978) that 6,250 people had deposited notes worth Rs 2.77 crore.
Surprised at a large number of donations to temples, trusts and institutions in Gujarat, Union finance minister H M Patel undertook a tour on January 19, 1978 to warn that institutions accepting donations in high value demonetized notes should prove that they had received them before the government had passed the ordinance. The impact was felt in most markets--diamond, bullion, and dyes and chemicals where use of unaccounted high denomination notes was substantial.
On January 20, 1978, TOI reported that there were long queues outside 16 collection centres in Ahmedabad even till 6.30 pm and some Rs 20 lakh was collected during that time. It was also alleged that in Bhadra and others areas Rs 1,000 notes were being offered for Rs 200 and yet there were no buyers. Bullion traders claimed that demonetization had pushed gold prices up from Rs 692 to Rs 710 per 10 grams.
Allegations of “leaks“ ahead of the demonetization drive had flown thick during the Morarji regime as well. Former PM
Indira Gandhi, during a press meet in Bangalore in February 1978, had said, “People in `certain circles' knew about the step well in advance and had got high-value notes exchanged.“ When a TOI correspondent asked her how much money she had lost after demonetization, Indira shot back: “I have nothing to lose.“
Indira was seconded by former finance minister
C Subramaniam
, who said that rival netas were the real targets.