DECEMBER 2016 ISSUE NO. 166
Will Demonetisation Overshadow the Kashmir Challenge?
R K ARORA AND VINAY KAURA
ABSTRACT In an announcement that caught the nation by surprise, Prime Minister Narendra Modi ordered the demonetisation of INR 500 and INR 1000 notes of the Indian currency in November to arrest 'black money', end corruption, and choke terrorist finances. This move represents a policy departure and it has far-reaching implications. As national debate has been hijacked by the possible fallouts of demonetisation, other critical issues have been pushed to the margins including cross-border infiltration, initiating political dialogue, and refurbishing the security architecture in Jammu and Kashmir. But the terror funding module in place in J&K is not likely to be affected to a significant degree by demonetisation, as terror outfits would only continue with their activities with some improvisations. This paper argues that the demonetisation policy has come to haunt India's security establishment in J&K as it is failing to strike effectively at terrorist organisations.
INTRODUCTION
Prime Minister Narendra Modi announced ensuring all security objectives. As is often the without any preamble the demonetisation of INR case with such major policy departures, the newly 500 and INR 1000 notes of the Indian currency on defined 'security' might well represent a 8 November 2016. Since then, public opinion on remarkable redirection of India's security and the policy announcement has been sharply strategic policy, with far-reaching implications. divided. The decision encapsulates the Modi The biggest challenge raised against PM Modi's government's newfound insistence on promoting move is the significance of cash as a component of its own doctrine of 'security'. It signals the prime terrorist financing and money laundering minister's intention to employ all feasible means networks in India. to protect India's security and internal The government's belief seems to be that environment. Curbing 'black money' and choking alternative economic methods could ensure terrorists' financing channels under the new national security more effectively than security doctrine seem to have become a means of traditional ones. It is true that unprecedented
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© 2016 Observer Research Foundation. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from ORF. Will Demonetisation Overshadow the Kashmir Challenge? economic measures are not meant simply to demonetisation is an open question. For even as facilitate economic activity, but rather to serve as the money stored with terrorist operatives in the a tool in advancing security goals. Unfortunately, form of big currency notes may have now become however, the road ahead for India, even when nothing more than pieces of paper, it will take paved by the prime minister's noble intentions them little time to collect money again. Given the and skilful tactics, is not without its potholes. The challenges in converting all transactions in demonetisation policy has not been able to strike cashless mode following demonetisation, the effectively at cash-driven terrorist operations of terror outfits are likely to continue with their the Islamist jihad variety in Kashmir, or the tactics, albeit with some improvisations. After activities of insurgents in eastern and central some time, fake currency can also be reintroduced India. into India. Clearly, what this demonstrates is that At the same time, the political and economic any measure focused purely on the economic confusion created by the demonetisation have dimension will be needlessly handicapping, come to increasingly hurt India's internal security limiting and shaping both policies and outcomes. rather than providing the government with an opportunity to achieve its stated objectives of STATE SECURITY APPARATUS flushing out black wealth, ending corruption, or clamping down on terrorist financing. The Of the 3,323 km-long India-Pakistan border, broader security goals of the country are getting 1,225 km falls within Jammu and Kashmir (J&K), entirely sidetracked by domestic politics and including the Line of Control (LoC) and 553 km in pressure. All national debate has been hijacked by Punjab. The International Border (IB) runs from the possible fallouts of demonetisation, in the Paharpur on Kathua-Punjab border to Chicken's process, marginalising the critical issues of cross- Neck area of Akhnoor, north of Jammu. While the border infiltration, starting of political dialogue, Border Security Force (BSF) guards the IB, the and refurbishing the security architecture in Army and BSF guard the 744-km long LoC, which Jammu and Kashmir. serves as de facto boundary between J&K and Kashmir has become a place where achieving a Pakistan-occupied Kashmir (PoK). successful outcome presents so many daunting Around seven lakh security personnel are problems to the government. In a region deployed in J&K. The Army's total strength is half characterised by acute sensitivities and bruised of it. The basic policing responsibilities remain egos, the central government should tread with the state police, with considerable support carefully to avoid stirring up fears and from the Central Reserve Police Force (CRPF), apprehensions among the Kashmiri people. India's largest paramilitary force. The Rashtriya Unfortunately, many of much-needed initiatives Rifles, which is the Army's specialised internal have been effectively thwarted by the currently security and counterinsurgency force, is also polarising political environment. Moreover, the designed to assist the state police. The main objectives of terrorists and insurgents do not responsibility of countering terrorism has been seem to have been deterred. with the Army and the paramilitary forces. The It is a well-known fact that Kashmir BSF and CRPF are stationed in large strength in insurgency is sustained by terror financing from cities and towns that are the hubs of insurgent across the border. The vast terrorist and terrorist activities. They are also used for infrastructure in Pakistan provides the Kashmir- keeping the highways open. based terror groups with training, weapons and money. The Hawala route is mainly used as a LOCATION OF MILITARY BASES means to ease money laundering and terror financing in Kashmir. How the terror funding Increasingly frequent attacks on Indian military module in place right now will be affected by bases situated in Punjab and J&K is a matter of
2 ORF ISSUE BRIEF No. 166 • DECEMBER 2016 Will Demonetisation Overshadow the Kashmir Challenge? serious concern. Most of these camps are from a located along the international border in Punjab pre-insurgency era, leaving them vulnerable to or Line of Control (LoC) in Jammu and Kashmir. breach and infiltration.1 While Pathankot, for The modus operandi has largely been unchanged example, had a security wall, most bases only have Gurdaspur, Pathankot, Uri, and now Nagrota