A Revolution by consent.
“ Revolution is not a dinner party” is a famous observation by the Revolutionary Chinese Communist leader, Mao Tse-Tung. He was just highlighting the pain and suffering that a revolution involves. Every revolution has costs, and people suffer. If, at the end, the revolution brings better life for the people, the people will feel that the suffering is worth it. So it is with the demonetisation of higher currency by the Modi government.
The Communist Revolution in China was a bloodbath while the revolution that Modi government has ushered in with the demonetisation of Rs.500 & Rs.1000 notes is a revolution by consent. Yes, there are costs - some people lost wages, some had to stand in a queue for long hours, some unscrupulous people have used their workers to exchange their currency. By and large, people have welcomed the move as it is in the larger interest of the country.
PM Modi had promised to unearth black money hoarded in India and abroad during the election campaign. The NDA manifesto had mentioned it as all Congress scams were fresh in the minds of the people - 2G scam, mining scam, CWG scam etc.
Modi had taken it up at the international fora and had made changes in the bilateral agreements with many countries to trace it. He had provided a window to the holders of black money to declare and pay taxes and penalty. He had also spoken about other stringent measures as well.
Bouquets and brickbats
Dr.C.Rangarajan, the former governor of the Reserve Bank of India and Bric Bank Managing Director K.V.Kamath have welcomed the demonetisation. “ By far the most important outcome will be that ,” said former RBI governor, D.Subbarao, “ as the shadow economy merges with the formal economy, it will spur economic activity into a virtuous cycle.” Way back in 1923 Dr.B.R.Ambedkar had recommended replacement of Indian currency every ten years to curb corruption and inflation in his book, “ Problem of Indian Rupee”. It has been hailed by Bill Gates of the Microsoft and Jyrki Katainen, Vice-President of the European Commission.
There are voices of dissent as well. Some have said that black money would be generated after a few months or years. Most of the opposition parties such as Congress, CPI (M),SP and BSP have supported the objective of demonetisation but have spoken against its implementation which has inflicted hardship on people. While the government is ready to have a discussion on the issue, the opposition has stalled both the houses of parliament demanding that the PM be present and reply to the discussion.
The Trinamul Congress and the AAP have called for “roll back” of demonetisation and have even organised protest rallies, and have made representation to the President of India, who has hailed it.
Only two opposition parties have welcomed it - Chief Minister of Bihar, Nitish Kumar JD (U) and. Odisha Chief Minister Naveen Patnaik (BJD). Overwhelming people of the country have welcomed the move of the Prime MInister to stem the tide of corruption in the country as revealed in polls conducted by an agency, V-Voter, and by the PM’s office. The local body elections held in Maharashtra and Gujarat have confirmed the support of the people for the demonetisation.The applause that Modi gets at his public meetings also indicate people’s support.
Lok Nayak, Jaya Prasad Narayan had called elections as “ gangotri” ( source) of corruption. It is to be hoped that Modi government would come out with a legislation to fund election by the government, and make it mandatory to have internal democracy among the recognised political parties to clean-up our political system. Internal democracy of the political parties is essential safeguard our democratic ethos.
Some critics have opined that it could have been done without disrupting the normal economic activities of the people. “ Demonetisation politics, “ observes Pratap Bhanu Mehta, president of Centre for Policy Research, “ unfolds a vast morality play.” It's imagination unleashes the state on you, in the name of protecting your own virtue.” He quotes approvingly the suggestion of Suyash Rai of NIPfP ( National Institute of Public Finance and Policy) to replace old currency with new within a period of three months to avoid costs to the public and the government itself. He has mentioned the cost of the exercise - cost of disruption of life, especially of the poor; cost printing and exchange of currency; loss of production in the industrial and agricultural sectors. This was also theme of the Former Prime Minister Dr.Man Mohan Singh when he spoke on this in the Rajja Sabha. He said there could be a reduction of 2% in GDP; it was a ‘monumental mismanagement’; a case of organised loot, legalised plunder of the common people; it may weaken the faith of the people in the banking system.
However, we all know that after years of planned economy, initiated by the Congress, and supported by the Communists and Socialists, India became virtually ‘the permit-license raj’ where selected businessmen and public sector companies had a monopoly to produce goods & services, and sell the shoddy goods at monopoly prices. The result is, 400 million people are below the poverty line. This is the real legalised plunder and mismanagement of the economy.
Things changed dramatically when PM Narasimha Rao liberalised Indian economy. The ‘unbound India” changed the face of Indian economy. Within a few years there were no queues for scooters, cars and telephones, and many other consumer goods. Indian economy raced forward to 8% GDP growth. “ Indeed the Congress, which had control of the economy for over 60 years,” states the Former Cabinet Secretary of the GOI, T.S.R.Subramanian, “ brought the country to its knees, and was primarily responsible for the hardship of the populace. Yet, it has shed the most tears for the ‘common man’. who was treated with great disdain hitherto.”
Rationale of demonetisation
“ There comes a time in the history of a country’s development,” said Prime Minister Narendra Modi In his address to the nation on demonetisation on November 8, “when a need is felt for strong and decisive step. For years, the country has felt that corruption, black money and terrorism are festering sores holding us back in the race towards development.”
Corruption and black money are the curses for all countries, especially for the developing countries like India. Shadow economy in the US is estimated to be 8.6% of GDP ( about USD 1600 billion) by the Word Bank. It is 12.7% ( about USD 1400 billion) in China; 11% in (USD 480 billion) in Japan; and 22.2% ( USD 500 billion) in India. When people do not pay their taxes to the government, they cheat not merely the government but the community as well as the tax money is used to provide social services to the common people - to build schools, hospitals, roads, railways etc. One of the main reasons why our country has so many people below the poverty line 79 years of Independence is the menace of corruption and black money. It has well-said that taxation is the price we for a civilized life.
There is black money ( money on which tax has not been paid) and there is fake money ( counterfeit money printed by criminals and enemy countries). While the black money is a curse on the people, fake money is a great threat to the country, and its people. The black money and the fake money has been used by the terrorists, motivated and trained by Pakistan; Naxalites who prevent economic progress to reach the poorest of the poor; and the separatists in the North-East and Jammu & Kashmir. Then there are drug mafia and the anti-social elements. According to the Finance Intelligence Unit (FIU) of the Government of India, there has been a quantum jump in the suspicious transaction reports (STRs) during the last five years (2006-10 and 2010-15) - from 17,000 to 2,23,000. There has been an increase of 6.7% in the detection of counterfeit notes by the Banks and the RBI in 2015-16 - 6,32,926 from 5,94,446. The government wants to choke these activities.
The RBI has stated that almost 81% ( Rs.11.35 lakh crore) out of the Rs. 14.17 lakh crore currency in circulation has come back into the banking system as on December 7,2016. It has supplied new notes worth Rs.3.81 lakh crore. It has also released lower denomination notes ( Rs.100, Rs.50, Rs.20 and Rs.10) amounting 19.1 billion pieces, more than what it supplied in the last three years. Demonetisation decision was taken to deal with the high quality counterfeit notes and to unearth black money held in cash, stated RBI Governor,Urjit Patel. The decision was taken after detailed deliberations.
There are reports that some people have thrown the old notes in rivers, and some have used their workers to put them in their accounts. Some bank staff have helped in converting the black into white at a commission. The money in the Jan Dhan accounts have swelled from Rs.45,636.6 crore to 74,321.55 crore since November 9. Government of India and the Income Tax Department have a big task to filter the accounts and punish the guilty.
Origin of black money
It all started with rationing during the second world war by the British. Not merely cereals but writing paper and things like that were sold in black market at that time. Scarcity is the mother of black money. After Independence, prohibition of liquor and the ban on gold import, later nylon yarn/cloth gave phillip to black money, smuggling, corruption, and gang-wars. Weapons and drugs were also smuggled by these gangs. Gangs also got involved in real estate to threaten the tenants. This money also went into film business.
The web of black money and corruption has seeped into all activities in our country. Is there anybody in this country who has not paid black money to get a house/flat ? Is there anybody in this country who has not paid speed money ? What about the donation to get seats in the medical colleges ? Why our roads are in poor conditions ? Why people have to wait to get a birth certificate for weeks ?
Efforts have been made to deal with it. Many previous governments have given amnesty to black money-holders. They have not brought about much change in the situation. Modi government too tried to persuade black-money holders to come clean. The demonetisation of Rs.500 and Rs.1000 notes has dealt a death-knell to these people. All their cash has become pieces of paper on the night of November 8.
Root causes and cure for black money
Root causes of black money are two - scarcity and high rate of taxation. When there was abundant supply of scooters, black money for scooters disappeared. If there is enough seats for higher education, donations will disappear. Black money got an impetus when the marginal tax on income reached 97% during the regime of Indira Gandhi. After the liberalisation of the Indian economy, when P.Chidambaram brought down the taxation rate in his ‘dream budget’, income tax revenue increased. Chanakya had said that the ruler has to collect tax like a honey-bee which collects it without hurting the flower. Ruler should not kill the hen that gives golden eggs.
The demonetisation revolution has offered an opportunity to all our citizens to start with a clean slate. If all major payments are made by a cheque, or the internet or by a mobile phone, it will minimize black money creation. If all government services are made available through the internet, interface between the bureaucrats and the people is reduced, speed money habit would come down drastically. It was started by CM Shivraj Singh Chouhan in Madhya Pradesh, has now been adopted by many others.This should be spread all over India.
Modi, like Mahatma Gandhi, believes that fundamental changes can be made only when people are inspired by an ideal. Modi, believes he can bring prosperity to the people by abolishing corruption and black money and seeks cooperation from the public Let’s join the battle for a better India.
December 14,2016
********
