Curtains
are about to draw on Demonetisation exercise, though remonetisation will still
need considerable time to be completed. In my opinion, while demonetization was
a good idea, it could have been planned and implemented better. The objectives
set to be achieved with demonetisation were utopian. The only achievable
objective of this exercise should have been elimination of fake currency and
may be instil fear in the minds of corrupt. It was possible to eliminate
counterfeit currency in the denomination of five hundred and thousand rupees,
in case the currency was exchanged with due deliberation and counter checking
at all levels. However, the demonetised currency has been deposited in the
banks in a rush, as also possibly in a hush-hush manner, especially where it
has been deposited and exchanged by banks via backdoor as being reported all
over the media. There is a possibility that counterfeit currency may also have
been exchanged with new currency in such transactions, thus defeating the only
achievable objective of this exercise.
A
surgical strike is an attack that is planned well with full intelligence and
surveillance of the enemy, detailed preparations, rehearsals down to minutest
drills and launched with surprise and lightning speed. Thus the surgical strike
on black money turned out to be a mere cliche as it lacked most of the
ingredients for success of such a strike other than surprise and lightning
speed.
Demonetisation has definitely resulted in economic sluggishness. The industrial production has
slowed down, perishable crops got partially destroyed, laborers were de-hired and
consumption reduced due to cash crunch. The meltdown may be of temporary nature,
but will last for minimum six months. This onetime loss due to slowdown and the
cost of demonetisation will be the net national loss. The financial dip is
besides the promised discomfort of fifty days and loss of nearly one hundred
lives. Sadly, some employees of the banking sector who helped converting the
black income as also generating additional black income in new currency as
commission for their services got added to bandwagon of the corrupt.
It
is the duty of the State to deal firmly and bring to book money launderers,
black marketers, tax evaders, defaulters and criminals. However, it should
never ridicule its subjects, even if they oppose its policies. Attempt to
create a divide between the rich and poor or successful and unsuccessful has
been distasteful because neither every rich or successful person is corrupt,
nor every poor and laid back person honest. Thus creating a negative psyche
across the length and breadth of the country has been the most serious negative
impact of demonetisation.
In
fact, the nation was midway of implementing GST. Our western borders had heated
up. Therefore timing of demonetization was strategically wrong. Demonetization could have been pended for better preparations, meanwhile settling scores with
Pakistan and implementing GST in totality. The nation was thus caught with both
feet in the air. A knockout punch could have been disastrous.
Lastly, it is incumbent on the Government to facilitate and promote emerging
technology for exploiting its dividends. However, it can never be a good idea
to suddenly enforce it on the citizens as there are positives and negatives
associated with every technology that need to be understood with experience.
Various sops and prizes announced to encourage online transactions smack of
cheapness.
Today
the problem is with the governors and not the governed. Corruption like
everything else trickles from top. Political funding is the most potent creator
of black income. Various exemptions and reservations are other causative
factors for generating black income.
Actually,
Black Money is a myth. Money is either real or fake. However, illegitimate
income may be termed as ‘Black Income’. It is also known as ‘Haram ki Kamai’ in
common Indian parlance. Most of the black income will always remain invested in
property, gold and business for appreciation or spent on lavish ceremonies and
affluent life style. A very small portion of it may be held as idle currency
that keeps getting devalued continuously, without generating any income.
The
black income generators can be clubbed in two categories. First category is
those people whose income is legitimate but they avoid paying thirty percent or
less tax to the govt. They are basically business men, self-employed
professionals like doctors, lawyers, architects, builders and property dealers.
Of course they have to part share this income tax theft as bribes with
officials and pay penalties when caught. Second group comprises individuals who
earn through illegitimate means and their hundred percent income is black. They
are corrupt politicians and officials dealing with procurement and public
largely for law enforcement or assessment. The Government should target the
second category of black income generators whose cent percent income is illegitimate.
The officials will then, automatically round up the first category.
Income
Tax Department should be strengthened to empower them. Besides its regional
branching, the department should be reorganized and have specialized branches
or officials to target various professions like politicians, government
officials, businessmen, industrialists. Their performance should be quantified
and further career progression linked to the results in their current
assignment. It will ensure equitable targeting of citizens in all walks of
life.
Only
those financial transactions that are transacted through the banks should be
permitted for computing the expenses by the business entities. This will compel
them to pay salaries through banks. Income Tax Act should be amended to lower
the Tax rates and remove as many exemptions as possible.
It
should be made mandatory to hold a valid Adhar Card and PAN within a reasonable
period of time (say six months or one year depending on the practicability) for
registering of birth and death, admission to educational institutions, opening
of bank accounts, availing jobs in public and private sectors, transacting
business, professional practice, payment of salary and pension, owning
property, electricity and water connections, exercise franchise, seeking
justice and social security, medical care, using public and organised private
sector transport like rail, bus and aircraft services and availing subsidies etc.
Bringing
back ‘XYZ’ lac crores of black money stacked in Swiss Banks is another myth. On
recovery, whether this money is distributed equally amongst all the citizens (the
promised fifteen lacs per individuals) or remains in the pocket of a few
corrupt politicians and industrialists, its infusion into the Indian economy
will fuel high inflation. Goods and services will remain constant but the demand
will rise with increased affordability. It will also make the laid back people
lethargic and counterproductive to economic growth. It is better that this
money remains frozen in Swiss Banks out of circulation of our economy. This is
the only option to neutralize the black income stacked abroad. Another cliché
for this is ‘Chori ka Dhan Mori Mein’, the ‘mori’ being Swiss Banks
The Government
should bank on professional advice, concentrate on macro planning and act
deliberately without undue haste. Those who excel in one field need not have
even reasonable knowledge of other areas. Therefore endorsing of demonetisation by Babas, actors, sportsmen and other socialists did not repose much confidence
in the public. Economists may have ensured better sunshine. Lastly, I am only a
Veteran, not an economist. Take my advice with a pinch of salt and lots of
pepper!
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