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.
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)