"Corruption is Authority Plus Monopoly Minus Transparency"
According to Indian Institute of Public Finance and Policy (IIPFP), evasion of personal income tax (48%), under-reporting of production (28%) and under-registration of immovable property (18%) account for 94% of illegal income generated domestically and India's black money is estimated by some experts to be around 20% of India's GDP in 2016 ($ 2.3 trillion) which works out to a colossal Rs 30 lakh crore ($ 460 billion). Further, according to some estimates major chunk of black money (75%) has been invested in undisclosed foreign holdings, real estate, precious metals like gold, diamond, undervalued stocks, benami financial investments and barely 25% is stashed in cash.
PM's audacious move, in the initial days, seemed to have choked the supply of black money into hawala operations, real estate transactions, financing of cross-border terrorists, insurgents in North East & Maoists, stone pelting in J&K and election funding besides abolishing counterfeit currency. However, those sitting on huge piles of unaccounted or ill-gotten wealth soon started getting restless and sprung into action of converting their black money into legal tender. Raids by agencies like Income Tax, CBI, ED, DRI and others have unearthed massive laundering of unaccounted black money and confiscated nearly Rs 4,000 crores in the form of new currency notes, gold, diamonds etc from these culprits. Media must be complimented for their invaluable sting operations and investigative reporting on the underhand exploits of the unscrupulous practitioners of JUGAAD (ingenuity) to subvert and undo demonetization with the connivance of corrupt bankers, bureaucrats and politicians. The services of poor and jobless were suitably utilized for depositing money in Jan Dhan accounts, for standing in long queues for exchange of invalid old notes in small lots, proving the maxim that in critical moments even the very powerful and rich have the need of weakest and poor.
Govt's decision came in for scathing criticism by many opposition parties and they didn't let Parliament function during most of its winter session. It is an open secret that some politicians have personal reasons to raise their banners against this bold step as they stand to lose their assiduously hoarded unaccounted black money. However, this historic step was praised by some opposition Chief Ministers like Nitish Kumar, Naveen Patnaik, Chandrababu Naidu to name a few creating dissension. Besides, PM Modi chose to take his fight against corruption in the people's court through his aggressive speeches and 'Man ki Baat'. He appealed to their collective goodness and honesty promising more attacks on the citadel of corruption in coming months. His political instinct in reaching out to common man seems to have worked so far as no riots or serious law & order crisis happened in most of the country as imagined by some politicians. The corrupt may wail, critic may whimper, cynic may whine but protagonist of a better, clean and developed India are not unhappy. This bold and ambitious step is likely to boost Govt revenue, encourage bank lending, bring down interest rates and promote cashless shopping. In a big and diversified country like India it may be impossible to have a cashless economy but with focus on digitization some proportion of cash can be decreased gradually. Less cash plausible, cashless economy difficult.
PM Modi can take heart from the ground reality that an overwhelming majority of Indians have backed his resolve to fight corruption in spite of tremendous inconvenience suffered by them in the last 50 days. Their love and respect for him will increase further if his Govt takes speedy action to nab big sharks and whales flourishing for decades in the murky waters of corruption and black money. The man on the street will have a vicarious pleasure if a special fast track court is set up soon to prosecute all demonetisation-related criminals - be they bankers, bureaucrats, politicians or businessmen - within a stipulated time-limit of 90 days. Their names should be in public domain to deter the potential crooks. Other high-profile pending corruption cases like 2G Spectrum, Coalgate. Railgate, CWG, NHRM etc need to be expedited and guilty punished. PM may also consider mandatory digitisation of land and property records linked to Aadhaar & PAN numbers, simplification of tax structure and other reforms suggested by various experts and committees to curb regeneration of black money. The pragmatic advice of great thinker Chanakya (370 - 283 BC) in the matter of tax collection is still relevant "A taxman should be like a honey bee which sucks just the right amount of honey from the flower so that both can survive." Also, the quantum of punishment for big ticket financial fraud cases should be enhanced to at least 25 years in prison without parole. It is pertinent to recall that in June, 2009 a US court sentenced fraudster and operator of a Ponzi scheme, Bernard Madoff to 150 years in prison and penalty of $170 billion for his ponzi scheme. Can we expect such exemplary punishment for similar crimes committed in Saradha, Pearl and Rose valley ponzi schemes in India? In the last 70 years the experience of honest tax-payers has been that strong and powerful criminals manage to escape the clutches of law. This perception should change and Modi Govt can do it. But the biggest blow to black money will come if Govt brings the funding of political parties under the purview of RTI & Income Tax authorities. Transparency in polity will have a domino effect on improving the quality of bureaucracy and judiciary.
It is not clear as to how long cash crunch will last and so far it had been a 'Winter of discomfort' for the silent majority. But if Govt can restore even 70% of normalcy in the availability of reasonable cash through banks/ATMs, by mid-Jan, 2017 the honest and hardworking populace of the land may be willing to forget their misery and soldier on with same fortitude as they have done since Nov 8, 2016. hoping for better future echoing Shelly's uplifting words "If winter comes can spring be far behind". After 50 gruelling days it's advantage Modi.
Modi Government's bold and decisive move has the potential to create mass change in one stroke.The net impact on this move on the startup economy will be positive. More govt funding through unpaid tax dues that can be ploughed into Startup and Innovation programmes so the young and upcoming entrepreneurs should welcome this implementation without much grief. "It's a good thing guys!"
ReplyDeleteWhile this decision is a surprise, it is a continuation of various measures taken by the government to fight black money and corruption.While e-comm companies that see a huge chunk of payments happening through Cash on Delivery mode will face some challenges in the initial few days, in the long run this move will only bring about positive changes.
But we must look at consumers such as patients with chronic illness and old patients, they always keep cash with them for all sorts of medical needs and usually old patients living alone always ensure they have sufficient cash for emergencies.Looking at the new limits for withdrawal it will take time for these people who rarely go to a bank to recollect sufficient cash. Even once the bank gets opened everyone would like to use cash for daily needs until there is an emergency. Apologies for the discomfort. Imperative provision must be implemented immediately on this front.
On the other hand...
Greater financial transparency and opportunity for stronger governance with no strings attached. And most importantly, the opportunity to grow global and/or raise funds internationally will be far simpler.
Even though Experts including a former RBI Governor and the current Chief Economist of the World Bank have spoken against demonetization.
Then the eternal debate (GST Vs Demonetisation) of Modi government's decision to demonetise high denomination currency notes is not 'good economics' and the collateral damage of demonetisation is likely to far outstrip the benefits. I hope to see and feel the potential positivity of this iconic and historical movement once the winter fog clears and sunny spring follows.
Mr. Singh such a delight to read your positive, accurate and uplifting words to the beginning of 2017. All we must remember is this decision was taken to stamp out black money, rampant corruption and stem the circulation of counterfeit currency in the Indian economy. Let us all play our part and do our bit!
Thanks for your dispassionate and professional comments. As you say " We have to do our bit"
ReplyDeleteA factual analysis on our PM's noble intentions and people's expectations in future to curb not only the menace of Black Money and Corruption but creating a new order (ala his New year eve Speech).
ReplyDeleteHowever, Top-down approach as against Bottom-up approach would have been more convincing of his intentions because it is well known that all these evils start from Politicians. To that effect, concrete steps on transparency in political funding and breakup of politician/bureaucrat/businessman nexus would have been more convincing not only for his ardent followers but all the critics, cynics and protagonists as well. The need to put the whole nation in pain and turmoil could have been avoided or better still could have been part of next steps to follow.
Additionally, the timing (crucial elections in early 2017) and unfulfilled promise of election manifesto to bring back the black money from Swiss banks (15 lakhs to be deposited in each account) remains questionable. Hence, all new promises seem hyped and orchestrated towards political gains only
Nonetheless, as articulated in this analysis we do hope that the revered PM focus on those steps/actions duly highlighted and let us await the impact of his action/s in six-twelve months to give the final verdict and keeping our fingers crossed that this valuable need do not become yet another unfulfilled promise to his lovers, voters and nation. After all, corruption has seeped in our blood since birth and difficult to separate.
Hope means hoping when things are hopeless. But things are not hopeless today as they were in early 2014.Key to corruption lies with Politics of the land. If polity is transparent and honest others will fall in line.It would be naive to believe that in last 30 months Modi has sorted out all problems but it may be disingenuous to say that he hasn't done anything. Time for optimism.
ReplyDelete* #DeMonetisation is one of the steps to address Black Money issue,but the real tangible benefits are many :
ReplyDelete* It severely dented Havala operations
* Impacted supply of cash to militants especially in Kashmir &NE
* Restricted supply of cash to Naxalites who are virtually controlling several districts in Eastern India
* Ensured increase in digital money transactions and thereby widening the tax bracket
* Several co operative banks are reluctant to follow RBI norms.These institutions are running business of millions of Rs without any tax liability (under some pretext to help the farmers).Now these institutions have come under scrutiny & under taxation as applicable thus brodering the tax net.
PM Shri Narendra Modi has taken up such bold steps which none of the politicians even dare to think,majority of ordinary folks understand this truth,the truth MSM fail to gauge or understand ordinary people of India.
Well said.
DeleteVery well said and nicely presented. Although their would be short term impacts and inconvenience to masses but the long term gain would make it worth taking the pain.
ReplyDeleteUnfortunately whenever you want to do anything good in our Country, corruption is the biggest enemy which comes in the way.
Very exhaustive and well researched.
ReplyDeleteI could not experience the circumstances of the demonetization fully, as I have been away from India. Nevertheless, my family and friends have been able to cope very well with the difficulties with the cooperation of friends and well wishers.
I have been reading the views of most of the columnists. I feel that they have not been able to analyze the policy and its implications effectively. The columns of Prof. Jagdish Bhagwati and one other columnist who noted the effect on the lowering of market prices of the commodities, the enhancement of the tax base etc. seemed sober and well researched.
Prime Minister through his command of the situation and RBI through its regular monitoring of the developments and making necessary policy changes have managed the entire programme very well. The newspapers and TV channels are no longer making it a major issue. Hence we appear to have overcome the difficulties and are in the final stages of normalization.
We hope that the Government would soon come out with a clear cut assessment of the Demonetization programme and announce further steps in their road map of eliminating the black money and streamlining the Indian economy.
PM Modi is a stubborn leader and he won't give up his crusade against Djinns of Corruption. Honest of the land must back him to the hilt.
DeleteAs much as I believe in the good intent behind this iconic step, the excecution left much to be desired. Unscrupulous bank managers and officials plus the press made matters worse. People were inconvenienced but quelle surprise, no mass riots, no burning effigies and no hunger strikes! So the "Winter of discomfort" wasn't as treacherous as we were made to believe. The barter system came into play, acts of kindness shone through and honest buearocrats and bank employees were appreciated.
ReplyDeleteYour articulate, concise and fact based analysis helps make sense of it. I wish PM Modi had shared some facts (as well) in his televised appearance and maybe an apology for the inconvenience caused may have won more hearts. In moments like these a little empathy goes a long way. I hope he asks you to write his speeches!
I also hope the much needed positivity that emanates from your piece is contagious and spreads fast among the masses. Our spring is upon us and now the PM has a whole slew of promises to keep. Let's get crackin'!
Apt,balanced and crisp comments.Patience is bitter but its fruit is sweet. We should wait a little longer.
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