Through demonetisation, Modi has just redistributed black wealth from poor to his rich friends

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The reports of how millions of people have been made desperate for cash in the wake of the haphazard withdrawal of Rs 500 and Rs 1000 notes have not allowed me to have a good night sleep since Prime Minister Narendra Modi made the announcement on demoinitisation.

Contrary to Modi’s argument, the decision does not curb the annual black money generation, conservatively estimated at 30 lakh crore. At best, it only deals with cash portion of black economy (data from income tax recovery of black money assets from 2012-13 onward shows cash is only 6 % of such recovery) and is leading to much greater collateral damage because of immense economic loss due to reduced economic efficiency as smooth functioning of markets have been disrupted as a result of cash crunch.

black wealth

With banks running out of cash and ATMs not configured to handle new notes, the government has simply been caught napping with regards to adequate preparation for such a momentous decision. It would be wrong to assume that Modi government could not have foreseen the mess it was pushing both our economy and society into. Nowhere in the world has such a decision been successful in dealing with black economy and India surely was not going to be an exception. Yet, the government chose to push India into what’s now fast turning out to be an utter mess?

I refuse to believe that this was merely a inaction of incompetence. To me it has all the makings of a massive scam being committed in the guise of fighting black money.

A bonzana for the counterfeit industry

Bringing in new currency is usually an effective way to deal with counterfeit currency. In India periodically, new currency with additional features has been introduced to tackle counterfeit currency. But, primarily due to the cost involved, the measure is taken only after significant additional securities are added. And once the step is taken, there is a gap of many years before the next round of new currency can be injected.

But the current notes are reported to have no new features, reportedly because the government didn’t leave any time for adding them by rushing into demonetisation. This is a bonanza for counterfeit industry as they will save a lot on time and cost, which they would have incurred if the additional features had been there. Secondly, the government has not publicised sufficiently about the security measures in the new notes thereby helping the counterfeit industry to thrive by exploiting the ignorance.

Thirdly, the leak of new notes to BJP functionaries before the official release of these notes, counterfeit industry got a head-start in creating new notes and getting them in circulation in the early days.

The panic has also further facilitated the counterfeit industry as the overburdened bank employees are not able to vet the notes being exchanged, thus providing a big loophole for those who want to exchange their present holding of fake cash with real ones.

BJP may have made a killing by leaking out information

The theory that information of the impending demonetisation had been leaked seems plausible for couple of reasons. First, there are many BJP office-bearers, who posted selfies with new Rs 2000 notes, days before the PM made the announcement. If these people knew of the new notes replacing old, many more would have been informed beforehand. Secondly, the BJP’s WB unit deposited at least Rs 3 crore hours before this decision was made public indicating it had been tipped off about the measure. Thirdly, the deposits in banks rose abruptly in the last quarter indicating people with advanced knowledge may have deposited their larger currency.

The strong indication of BJP leaking this information points to a scandal of monumental proportions. This substantially compromised the possibility of large black cash becoming useless as people with prior knowledge got rid of their undeclared currency. It must be looked into how much and in what way the BJP benefited from such loss to public.

Boosted black marketing

The widespread shortage of cash has led to rampant black markets for exchanging the disallowed notes of Rs 500 and Rs 1000 with smaller denominations with the black marketers raking big gains. The going rate is sometime as much as Rs 300 of smaller change for Rs 500 of larger denotified currency.

This black market is giving a huge fillip to the very black money that the demonetisation is supposedly meant to target. Those who are profiteering through such exploitation will not be reporting the profits as income nor would they pay tax on it, so this becomes black money.

The PM himself seemed to have known of the impending chaos as in his announcement, he asked people to bear the pain. And if the PM didn’t know the potential consequences of his announcement, this poses serious questions to to his competency.

Redistributes black wealth from poor to rich

The prime minister took no steps to tackle black money stashed in foreign banks, in gold and property despite these avenues accounting for over 90 % of the total illegal assets. These avenues are also more preferred for those who are rich and influential compared to insignificant cash stored by ordinary citizens.

Yet Modi decided to target the common man while sparing the rich, thereby redistributing the black wealth. Also the powerful had prior knowledge and thus were able to come out significantly better from this mess than the ordinary folks. The organised racket of converting black cash to white after charging some commission seems to benefit the big fish who are behind such racket. The prime minister, therefore, has essentially redistributed black wealth from poor to rich and pulled off a spectacular scam-like feat of increasing inequality in the name of fighting black money.

A new chapter in crony capitalism

Modi made the announcement after 8 PM on the evening of 8 November, but Paytm had full page advertisements in several national dailies the following day. How is it that Paytm was able to book slots so late and how did it come up with the strategy at such a late time in a very short period?  This curious case of Paytm benefiting from the miseries Modi government inflicted upon people suggests that this was textbook crony capitalism where the government was colluding with Paytm and making aam janta suffer by making them withdraw cash so that people are forced to subscribe to Paytm en masse. Also how was Paytm using Modi’s photo in its ad. Had the PMO approved this? If yes, then who in the PMO gave the go-ahead and how the entire procedure of Paytm seeking approval to use Modi’s photo to the PMO approving it was carried out in the late hours of 8 November’s night.

This must again be scrutinised how deep is the collusion between Paytm and the central government. The whole nation being brought to a standstill for one company’s profit is final indicator of the dubious intention of Modi government.

(The views expressed here are solely the author’s own. The facts and opinions appearing in the article do not reflect the views of Janta Ka Reporter and Janta Ka Reporter does not assume any responsibility or liability for the same)

17 COMMENTS

  1. is it as simple as has been mentioned in Title?. Article not elaborate enough to make people understand!!.. Those assets bought for converting “Black” to “White”, were bought from cash, which is un-accounted. When you remove it, how does the wealth go from poor to rich?..Asset prices are supposed to fall after this, atleast property if not Gold. Those with “Black” have the only option of approaching Below Poverty Line people to put money into their accouts and pay commission. So it is money going from rich to poor.

    You know, Strength of a leader is in appreciating good things done even if done by your opponent!!

  2. The results are slowly spilling out. The rich and the powerful escaped long ago by stashing their money in Panama or Switzerland. Their luxurious bungalows have not been touched. The large section if poor and middle-class are bearing the brunt. The PM has ‘ promised’ the suffering till December last…so that the counterfeit racket comes into bloom with ‘ new’ currency! This is the punishment for recovering black money…!!

  3. Only time will tell what is the truth. I feel a movement has started.Every Indian realized that it is now his duty to raise voice against black money. This is happening for the good of the nation. The whole world appreciate expect for few people who cry from top of their roofs.

  4. Well analysed article!
    If people can join queue for hours for few thousand in return of their own hard earned money but in form of ‘illegal’ notes, why can not they unite to take state power in their own hands and get rid of the criminal, parasites ruling them?
    Power in hands of people, who create wealth and do not live on other’s hard work!

    • Spine less, ill-informed people. If people do not stand up for themselves now, they never will, ever. Lets not for get that this is a democracy and not an autocracy. Shameful! people got duped by the 15 lac promise. What can you expect if you vote for a bunch of inept people not even verifying their backgrounds? The PM is a pracharak who knows nothing about the peoples issues. The economy is run by inputs of thugs who till yesterday were in hawala and diamond angaria business. The “Gajendra effect” all over again, on a larger scale!

  5. On paper it looks good argument but u should substantiate it with some concrete proof and if not do not blame the system.only time will tell the future prospects. Do not create panic in the minds of people actually here there is too much of freedom of speech as rightly pointed by one chinese newspaper sometime back.That is the reason every tom, dick and harry will open his mouth against the Prime Minister.

  6. oh god its very bad Modiji is helping his millioneir friends but not helping his family one brothr is rikcshas driver, another running “kirana shop, his daughter died due to lack of insufficient medicl treatmnt and modijis mother at 90+ living alone without any servant and taking treatmtnt in municipl hospitl in general ward…it is bettr to work as a ‘peon’ of congress then being Modi.

  7. Utter rubbish, any body can understand this is a individuals perception. Nothing is factual here. Except deposits made bjp. Well plz tell what is the objective here? Isn’t getting the money to the bank. If PM has colluded then y even deposit in bank? he can convert and nobody will even know. Recirculating frm poor to rich the most absurd thing i have read in the recent past??. PayTM adv came the next 10th nov not 9th. .
    Bonanza counterfeit wow seriously !!! its clearly mentioned in every news papers the new features wondering if you even reads newspaper…Most info here is self cooked atrocities by Modi hater.

  8. Highly imaginative ,biased and anti-BJP. The comments could have been rather impartial by avoiding personal attack to the PM.Excuse, in no way I am a BJP follower.In many ways the above article could be refuted but resort to a single point that at least the enormous cash the political parties were holding on that eventful night went under deep water.Dont be jealous of BJP.They will also suffer by the cruel hands of justice of nature.Let the national derive whatever it can from the decision.You know a bird in hand is equal to two in the bush.Rescue the the nation from the deafening and cowardice silence.Some action is overdue in many a fronts and PM has just chosen to act.

  9. Those are frustrated how have black money and political parties are lose their black money which they used in every election.comman man still very happy with this decision.Rome never built in one day.

  10. This move is incorrectly seen as a big hit on black money . It is not

    It is hit on the M1 money which is money in circulation . This money consists of a lot of counterfeit currency , black money and unaccounted money outside the banking / financial system .

    So this is a hit on all this money and at one shot the move brings all this money into the banking system .

    This is a monetary policy move that helps the Fiscal policy . Now on the Fiscal policy can be better planned , and executed and will have much more impact as the Finance Minister will have a much better handle on the amount of M1 currency in the system .

    This also is a big step towards demonetization. In India cash transactions amount to almost 12 per cent of the GDP , whereas the benchmark for European nations is four percent of GDP. So demonetization is a huge challenge . This move gives the government a learning experience for demonetization in the future.

  11. The author will do well to substantiate claims made with concrete, validated proof. Otherwise it us just a heap of hear says. And I do not understand the sanctity if the publisher’s disclaimer … The views expressed are solely the author’s own…… Do not reflect the views of Janta ka reporter …..

    If so why does it choose to publish this author’s views and not of another one whose view may be diametrically opposite in the matter?

  12. The article is entirely based on assumptions. It’s neither validated with facts nor figures. The sudden surge in deposits prior to the announcement was due to the deposits of arrears and 7th pay commission. Govt. was elected democratically and we are obliged to give them the time and support.

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