Friday, November 3, 2017

1121. Demonetisation is not a Failure..

Reserve Bank of India had said in its annual report for 2016-17 that 7,62,072 pieces of fake notes were detected in the banking system last fiscal. It is a whopping increase of over 20% had mainly the denomination of Rs. 500 and Rs.1000 currency notes which amounted to Rs. 43.47 crores. Every Indian knows that these Fake notes were pushed by Pakistan through Nepal. The most notorious routes for smuggling fake currency into India were Bangladesh-Kolkata via North 24 Parganas, Nepal-Gorakhpur and Nepal-Bihar routes.  
Counterfeiter notes are only one aspect of “debauching” a currency. These notes then get christened as “black money”. We have this false notion that only unaccounted wealth is black money. Even fake currency also fall into this category as it is used firstly to market illegal goods such as narcotics, liquors, weapons, and human trafficking. Secondly market transactions for such goods are either unreported or under-reported.  Thus subsequent tax evasion leads to revenue loss leading to underestimation of GDP. 

These kinds of transactions involve bribery to twitch favours in business deals and to bypass administrative rules. Amazingly the bribery money is not in counterfeiter notes and gets invested in Gold, Benami properties or gets transferred to other countries through Hawala. Some clever players often bring it back in the form of FDI or using an NGO. So, now the Counterfeiter is in the system (among the ordinary citizens) and the RBI minted notes with the corrupt.   
The Government which took over in 2016 watched all these and decided to demonetize the higher denomination currency notes. Many of us have failed to understand that what was 20% increase in Fake Indian Currency notes could have increased to 50% in the next fiscal year and then more the next year. Demonetization has put a break on this. 

Understandably the phase out of the old notes was a bit chaotic. Some felt that the administration should have alerted the banking sector prior to announcement, but that would have led to an abortive demonetization effort. Bandh call given by opposition had lukewarm response indicating that the country was with the decision and accepted it as regrettable necessity in long term. We could see the corrupt running helter-skelter not knowing what to do with the unaccounted currency they had in their vault. Those no more invalid notes were found floating in rivers and burning in piles of garbage, apart from those confiscated by authorities from the fraudulent. 

It is very easy for the opposition to say that Demonetisation is a failure. It is the “I told you so attitude” in display which make them uncaring for the progress of the country. Demonetisation was just one way to curb corruption. It will have its meaning only if money transactions are made cashless by using debit cards and internet banking. My anticipation is that the next move by the government will be to take stock of black money invested in benami properties.

When the benami properties are investigated automatically the real estate will get back to its real worth. Just as G.S.T has been successful in bringing new tax payers in business sector the benami scrutiny will check the property rates which has soared high in metropolis. The politicians and bureaucrats pumping money for real estate projects will be hit. The rates of building materials like sand, steel, marbles, tiles, bricks, cement and wood will take a dip. Housing will be affordable for all. Time to keep a tab on the accounts of NGO’s, missionaries, donations pouring into political parties and bring them within the gambit of formal banking. 

If demonetisation is a failure the onus is on all of us to look for other means to check corruption and black money not to commemorate it as a “Black Day”. As we have often seen that the mostly the sufferer will mark it as black day…….Has the opposition lost anything monetarily??? I wonder!!!   

November 8th is “Anti- Black money Day”  

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