“Nobody knows, nobody knows, how the elephant blows his nose. Does he do a-tishoo on a tissue? Or does he simply wipe it on his toes? Nobody knows, nobody knows.”

In the third week of April, there was an unexpected shortage of cash in automated teller machines (ATMs) in over eight states spread across the length and breadth of India. Nobody has been able to come up with a plausible explanation as to why this suddenly happened a year and a half after the whimsical decision of one man, Prime Minister Narendra Modi,  to demonetise 86 per cent of the currency in circulation in the country on November 8, 2016.

Over a dozen theories and hypotheses have been floated by various experts and by persons who are supposed to be aware of what is going on. But none of these fully explain why hundreds of thousands of ATMs ran dry. However, one thing became amply clear: the episode has exposed like never before the vulnerabilities in the country’s financial system and the loss of credibility ordinary Indians had in their banks.

There is no doubt that despite the existence of what are supposed to be fancy methods of ensuring checks and balances — the Reserve Bank of India is supposed to have in place a highly-sophisticated Integrated Computerised Currency Operations and Management System (ICCOMS) in place to coordinate distribution of cash from more than 4,000 “currency chests” located in different parts of the country — every now and then, these systems seem to collapse putting millions into inconvenience.

What we witnessed was an unseemly blame-game for the lack of coordination among North Block (where the Union Ministry of Finance is headquartered), Mint Street (from where the RBI, the country’s central bank and apex monetary authority operates) and scheduled commercial banks and financial institutions who operate over 1,00,000 ATMs located all over India.

True, on this occasion, the hardships caused to ordinary citizens have been relatively muted in comparison to what took place in late-2016 when notebandi grievously hurt the livelihoods of the weakest sections of Indian society: women, senior citizens, daily-wage labourers, farmers, vendors, traders and small shopkeepers. But that is small consolation.

Consider some of the theories put out to explain the cash crunch. On 16 April, Finance Minister Arun Jaitley said there was a “sudden and unusual” increase in the demand for cash in “some areas” of India despite the “fact” that there was “more than adequate currency in circulation”. The following day, the Ministry of Finance put out a formal press release claiming that there had been an unusual spurt in currency demand over the previous three months.

Minister of State for Finance Shiv Pratap Shukla laid the blame squarely on the RBI for not distributing currency to various states in an even market, while Shivraj Singh Chouhan, the Bharatiya Janata Party’s Chief Minister in Madhya Pradesh, smelt a “conspiracy” because of the alleged “disappearance” of  ₹2,000 denomination currency notes.

Indeed, the Secretary, Economic Affairs in the Finance Ministry Subhash Chandra Garg stated that the number of ₹2,000 notes that were returning to the system was less than usual and added the obvious, namely, that the highest denomination notes were the easiest to hoard. This was precisely the reason why many had argued that if the government really intended to curb hoarding of black money in the form of cash by demonetisation, it defied logic as to why ₹2,000 notes were introduced to replace the now-illegal ₹1,000 and ₹500 notes.

Former Finance Minister P Chidambaram claimed that the supply of cash had been “arbitrarily reduced” implying that the government wanted to keep cash in circulation below the pre-demonetisation levels. An internal analysis of the RBI quoted in Business Standard contended that there have been more withdrawals than deposits in recent month. If this is the case, the question is “why” indeed.

One more theory doing the rounds is that despite the government’s assurances, the Financial Resolution and Deposit Insurance Bill (which is currently being examined by a Parliamentary committee and which may, if enacted, allow banks to use depositors’ money under certain circumstances to bail themselves out to prevent an impending collapse) has spooked ordinary depositors who have lost their faith in banks and prefer to hoard their savings in the form of cash.

Not one of these theories seemed to come together to explain what happened. If the data put out by the RBI is to be relied on, as blogger and number-cruncher James Wilson pointed out, there had not been any abnormal withdrawal of cash from ATMs till February and that the cash in circulation has remained more or less stable at around 11 per cent of the country’s gross domestic product (GDP). He is if the view that the cash supply-demand imbalance did not occur overnight and should have been anticipated by the RBI.

There were more theories to explain the sudden cash crunch. The Chairman of the largest bank, the State Bank of India, Rajnish Kumar talked about the increase in the demand for cash on account of crop procurement — not that this does not happen each year around this time. Others talked about the “marriage season” that was on. The Economic Times suggested that shortages of paper and ink contributed to lower printing of currency notes.

There was talk of many ATMs not functioning properly and still not being calibrated to supply the new ₹2,000 and ₹200 notes. Others claimed that there had been a drop in the use of e-wallets after “know your customer” norms were tightened.

Then, of course, came the political conspiracy theories since the elections to the Karnataka legislative Assembly are round the corner. An especially outlandish theory was that the true extent of the fraud perpetrated by the likes of Nirav Modi and Mehul Choksi had been under-estimated.

And so the rumour mills kept grinding with nobody knowing what was going on.

Recent news reports suggest that two of the major claims made by the proponents of demonetisation led by Narendra Modi have turned out to be completely untrue. It was claimed that notebandi would usher in a cash-less India, if not a less-cash society. As Wilson and others have pointed out, the annual growth in digital transactions in the country peaked at 53 per cent in 2016-17 and dropped to a rate of growth of 36 per cent the following year, 2017-18. Over the last five years, the annual growth rate has been around 44 per cent.

The Prime Minister and the Finance Ministry had claimed on 8 November, 2016 that demonetisation would result in a curtailment of the use of fake currency notes by terrorists. While this claim meshed well with the government’s discourse, the facts tell a completely different story.

On 20 April, the Press Trust of India quoted a report of the Financial Intelligence Unit of the Ministry of Finance stating that banks had reported a near five-fold increase in the number of suspicious transaction reports and a 400 per cent jump in counterfeit currency reports.

So what explains the sudden and suspicious drought in the supply of currency notes from bank ATMs? Should I recall what my son picked up in his school when he was 10 years old about the elephant blowing his nose?

The government surely did not want people to remember the terrible troubles they had to go through in the months after November 8, 2016. Then what were the real reasons for the cash crunch?

Perhaps the answer is simple and can be summarised in two words to explain the lack of coordination among different departments of the government: incompetence and inefficiency.