A Nation in Agony: Demonetisation – Is it Worth the Trouble? Part 2

Do you think that the aims of demonetization as pronounced by the Prime Minister on Nov 8th will be fulfilled?

The purpose of demonetisation as stated by the Prime Minister were ending black money, terrorist funding, arresting counterfeit notes and ending corruption. For that he said people have to undergo some hardships. People have to join the MahaYajna against the ills of corruption, black money and fake notes. He stated

“Let us ignore the temporary hardship”

“Let us join this festival of integrity and credibility”

“Let us enable coming generations to live their lives with dignity”

“Let us fight corruption and black money “

“Let us ensure that the nation’s wealth benefits the poor”

“Let us enable law abiding citizens to get their due share”

Initially like many others including few economists I too believed that these goals will be achieved. But after reading and getting more details I have great doubts. Let us analyse the four goals

1. Ending Black Money: Various reports including a white paper presented to the Parliament in 2012 state that only 5 to 6% of the black money is in cash. The GDP as on March 2015 is Rs.125.41 lakh crores. 21% of the GDP amounts to 23.3 lakh crores . Out of this 6% amounts to Rs. 1.58 Lakh crores. The initial estimates told by the Govt was that at least 3 lakh crores of black money will be caught. But from the available statistics today, almost nothing is going to be caught. For this should we have made crores of people to suffer? Should we have made every sector of the economy to suffer? Is it not the poor who are sufferers? Is it not the law abiding citizens who are suffering? What efforts have we taken to find out 94% of the black money which as per reports are kept as gold, real estates, foreign currency and in accounts in foreign countries? How could a former minister of the ruling party conduct a lavish wedding spending approximately 550 crores? How a sitting minister could hire charted planes and spend so much of money for a marriage? Do you think that the Govt does not know who is having black money? You ask anybody even in the street they will tell you who has the black money. The private colleges and Universities, real estate owners, builders and above all some of the politicians. Have we taken any steps to recover black money from them? Have you seen any rich man standing in queue in Banks or ATMs? So ending black money requires many other concrete steps especially ending election spending and checking the corporates, politicians, big business men, auditors, jewellers etc. What are the steps we are going to take to arrest generation of new black money as it has become easy to hoard Rs.2000 rupee notes?

   

2. Ending terrorism: Ending terrorism should be our goal but this is not the solution. Most of the terrorist funding is not in cash. You have to attack the root cause of terrorism.

3. Arresting Counterfeit notes: The reports say that the quantity of counterfeit notes could be Rs.400 to 500 crores. There are effective machines and mechanisms in the banks to find out counterfeit notes. This could be strengthened. The current exercise of demonetization is not likely to arrest counterfeit notes. There are also chances of new Rs.2000 rupee counterfeit notes coming into the market soon. Banks should be prepared for finding out these fake notes. So far nothing has been done as the counting machines have to be recalibrated or changed.

   

4. Ending Corruption: Again everybody knows where corruption takes place. The corporates are the biggest corruptors. There are enough reports and books on this issue. Just take one example. In the book, “Ambani and Sons” by Hamish McDonald (Roli books 2014), “No regrets” by D.N. Ghosh (Rupa Publications 2015) and “A feast of Vultures” by Josy Joseph (Harper Collins 2016) explain how Reliance Industries has mastered Corporate corruption and could have hold over every Prime Minister and influence policies in favour of them. The growth story of Adanis is also similar. If corruption has to end it has to start from the top. An estimate says Rs.35000 crores were spent by political parties for the 2014 elections. The late BJP leader Gopinath Munde had admitted that he had spent Rs.8 crores in the 2009 by election. Funding to political parties by corporates is very common. So the root of corruption has to be removed. At the lower level everyone knows that for getting an NOC for starting a college, approval of projects, getting a driving licence, registration of land, getting building approvals etc have a rate. I would like to appeal to the Govt to look at all these corruptions. Bring in Lok Ayukta, bring in decentralization, bring in transparency in every action and schemes, increase the number of judges so that court cases do not drag on for years and make CBI, the police departments, the Courts, tax departments and RBI totally independent.

   

How do you think that the people who had some black money could have exchanged it?

1. The sale of gold on the date of announcement went up over 70%. There are reports that jewellers had been accounting sale with back date. So some of the money would have been converted into gold. Jewellers and shop keepers would have issued bills with back dates for converting their own unaccounted money.

   

2. Somebody with 1 crore could have got 50 friends or workers through whom they could have deposited Rs.2 lakh each in their accounts and got them exchanged.

3. In Jan Dhan accounts one could deposit upto Rs.49000/- . So through Jan dhan accounts one could exchange 49 lakhs.

4. In loan accounts money would have been remitted and the auditors would have prepared suitable accounts for them.

5. In corporate accounts you could deposit any amount. Their transactions are so large that nobody can trace out whether it was black or white.

6. Tribals are exempted from income tax. A businessman had flown Rs.3.5 crores by a plane to Nagaland and claimed by Anato Zhimomi, son in law of the former Chief Minister and present Member of Parliament Nephiu Rio (who has alliance with BJP) . Many similar transactions could have taken place. News papers in north east say that there were atleast 35 flights like this landed in North East.

7. Some cases of collusion by Bank employees with friends to get exchanges done would have taken place. If there was any irregularity it will come to surface after some time and they will be sent out of banks. More cases are suspected from Private Sector Banks.

   

Finally what will be the impact?

Economy will slow down. Blame will be shifted to Bankers. Privatisation will be encouraged Public Sector Banks will be shown as Villain or asked to lend more under schemes which will not be repaid and the banks will become Bankrupt paving way for foreign investors to take over.

What is the alternative?

Criticise the move. Watch closely. Intervene at every level to safe guard the public and public sector. Even during emergency there was no upheaval but people silently voted out Mrs. Gandhi when she announced election with so much of confidence to win.

In Democracy we have to believe people. Educate people. Stand with them during their crisis. Organise debates and discussions. I am sure the Government will change the process if it realises or the people will change the Government.