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Prime Minister Narendra Modi handpicked a trusted bureaucrat, little known outside India's financial circles, to plan and implement the demonetisation move.
Hasmukh Adhia, Union revenue secretary, and five others privy to the plan were sworn to utmost secrecy, say sources with knowledge of the matter.
They were supported by a young team of researchers working in two rooms at PM Modi's 7 Race Course Road residence, as he plotted his boldest reform since coming to power.
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- Revenue secretary Hasmukh Adhia picked to roll out demonetisation
- Adhia and five others privy to the plan were sworn to secrecy
- Modi told Cabinet he’s alone to blame if policy fails
- Original plan was to announce demonetisation on November 18
Previously unreported details of Modi's handling of demonetisation open a window onto the hands-on role he played in implementing the policy, and how he was willing to act quickly even when the risks were high.
"I have done all the research and, if it fails, then I am to blame," Modi told a Cabinet meeting on 8 November, shortly before the move was announced, according to three ministers who attended.
Direct Line to Modi
Overseeing the campaign, with support from the backroom team camped out at 7 RCR, was Adhia.
The 58-year-old served as principal secretary to Modi from 2003-06 when he was Gujarat chief minister, establishing a relationship of trust with his boss and introducing him to yoga.
Colleagues interviewed by Reuters said he had a reputation for integrity and discretion.
Adhia was named revenue secretary in September 2015, reporting formally to Finance Minister Arun Jaitley. In reality, he had a direct line to Modi and they would speak in Gujarati when they met to discuss issues in depth.
The controversial demonetisation move scrapped money worth Rs 15.4 lakh crore, equal to 86 percent of cash in the country.
"One is never ready for this kind of disruption — but it is a constructive disruption," said Narendra Jadhav, a 31-year veteran and former RBI chief economist who is now a BJP MP in the Rajya Sabha.
“Biggest, Boldest Step”
Immediately after Modi announced the radical move, Adhia tweeted: "This is the biggest and the boldest step by the Government for containing black money."
The boast harked back to Modi's much-touted election promise to recover black money from abroad. Yet in office, he had struggled to keep his promise.
Over more than a year, Modi commissioned research from officials at the finance ministry, the RBI and think-tanks on how to advance his fight against black money, a close aide said.
He demanded answers to questions such as: How quickly India could print new banknotes; how to distribute them; would state banks benefit if they received a rush of new deposits; and who would gain from demonetisation?
The topics were broken up to prevent anyone from joining the dots and concluding that a cash swap was in the offing.
"We didn't want to let the cat out of the bag," said a senior official directly involved. "Had people got a whiff of the decision, the whole exercise would have been meaningless."
Under Adhia's oversight, the team of researchers assembled and modeled the findings in what was, for it, a theoretical exercise.
It was made up of young experts in data and financial analysis; some ran Modi's social media accounts and a smartphone app that he used to solicit public feedback.
Yet for all the planning, Modi and Adhia knew they could not foresee every eventuality, and were willing to move swiftly. The announcement has caused chaos, with huge queues forming at banks and outside ATMs.
Filling ATMs with Rs 8 trillion in new banknotes that the finance ministry reckons is needed to restore liquidity to the economy is a tricky task.
In a best-case scenario, in which the four banknote presses churned out new Rs 500 and Rs 2,000 notes designed to replace the abolished ones, it would take at least three months to hit that target.
Secrecy Paramount
Secrecy was paramount, but clues had been left.
In April, analysts at State Bank of India said that demonetisation of large-denomination notes was possible.
The Reserve Bank of India also disclosed in May that it was making preparations for a new series of banknotes that were confirmed in August when it announced it had approved a design for a new Rs 2,000 note.
The printing presses had only just started turning when the media finally started to run with the story in late October.
"The plan was to introduce it around 18 November, but there was a clear sign that it could get leaked," said one person with direct knowledge.
Some officials in the finance ministry had expressed doubts about the note ban when the idea came up for discussion. They now feel resentment at the secrecy in which Adhia rammed through the plan on Modi's orders.
They also say the plan was flawed because of a failure to ramp up printing of new notes ahead of time.
Other critics say the Adhia team fell prey to a form of “group think” that ignored outside advice.
In the words of one former top official who has worked at the finance ministry and central bank: "They don't know what's happening in the real world."
(Additional reporting by Rajesh Kumar Singh, Manoj Kumar, Mayank Bhardwaj and Neha Dasgupta in New Delhi, Suvashree Choudhury in Mumbai and Subrata Nagchaudhury in Kolkata.)
(Published in an arrangement with Reuters. This article has been edited for length.)
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