NaMonetisation – Will it really benefit the common people?

Samarjit Kambam *

People came to different bank branches to deposit Rs 500 and Rs 1000 notes on November 10 2016 :: Pix - Shankar Khangembam

Introduction

Thangjing (popularly known as black diamond or fox nut or gorgon nut) is botanically known as Euryle ferox Salisb and belongs to the family Euryalaceae (Nymphaeceae). It a monotypic genus that is having only one species. It is considered as an aquatic cash crop in Manipur. The hobby of the present writer is to buy vegetables daily from the markets of Imphal specially Khwairamband bazar.

He buys any new vegetables items at any cost. Thangjing is one of them he buys starting from early June/July onwards. The vendors sales Thangjing at the rate of Rs. 30 per Thangjing fruit or Rs. 50 for 2 Thangjing fruits. In this article the writer made an attempt to describe about the potential of Thangjing cultivation for socio-economic development in Manipur.

The announcement on 08 November by Modi to demonetise 1000 and 500 rupee notes has been viewed by many as a dictatorial decision in the guise of democracy. Some nicknamed him as Muhammad-bin-Tughlaq of the 21st century.

Now, the common people are in a fix just like honey bees flying directionless after their hive has been smashed, panic and pandemonium sparking nationwide, 55 deaths and counting and many other collateral damages. To Modi, its occupational hazard but it is tantamount to declaration of “Emergency” of a certain kind to the nation. The irony is that BJP opposed tooth and nail when the country under UPA regime proposed demonetisation of some currencies in 2005 with the BJP stating it “anti-poor”.

It’s a known but bitter fact that a parallel economy has been running in the country since independence beginning with the reign of the Grand Old Party and the issue of black money has been on the top of the agenda since Narendra Modi took over the reign of Prime Minister of the country on 26th of May 2014. But this waylay step should’ve been taken within a few months of his assuming as Prime Minister of India.

After hollering around for more than two years and waking up the unscrupulous ones (I mean the multi-millionaires and billionaires) who stash away lacs of crores of unaccounted money at Swiss Banks and evading taxes, the demonetisation of Rs 500 and 1000 notes making them null and void was sudden and surprising to us the common people, but the unscrupulous ones had been given ample time to prepare for the worst and do the needful and they are wizards in money matters with their middlemen enlightening them with their resourcefulness.

Short notice was given for denomination with the government stating that its tantamount to an ambush against a gang of outlaws where the sudden measure taken up since Nov 8 was intended to push the black money holders to the wall and tighter towards the corner. Many question the validity of the sudden declaration of demonetisation and the reason is quite obvious for it all comes down to time-frame.

But will it really be effective? Course, some crorepati chums were affected but will it really boost the country’s economy? Even P Chidambaram announced that the demonetisation (read replacement of currency notes) policy is a puzzle and could not even give a direct and favourable answer to the people.

It is a true to the bone fact that a mammoth quantity of Rs 500 and 1000 denominations which were circulated in India came as fake currencies from Pakistan and China and were used to fund terror groups and other activities such as child trafficking, drug smuggling, arms smuggling and other anti-national activities where transactions took place by cash hand to hand. Modi’s move may be considered a bold one. It is needless to say that unaccounted income or black money places an unfair burden on honest citizens. If a parallel economy runs, an unfair predicament is imposed on honest taxpayers.

So, as per Modi, demonetisation may catalyse long term reforms and gains and significant increase in revenue to the government by bringing down the size of the parallel economy. However, the battle against black money is worth it if resultant revenue gains increase and parallel economy shrinks, thereby automatically widening the tax base, allowing the government to reduce tax rates and boost consumption as well as enhancing the efficacy of welfare schemes if additional revenue accrues to the government’s coffer.

Many term Modi’s move as a daring one that resonates well with the sentiments of law abiding citizens on the one hand and with recommendations from several experts on the other. The current situation, of course, is an outcome of several years of tax evasion under several phases of governments. It is a move of sweeping out the black money which was swept under the carpet since decades. The only concern is, “Can all the black money be swept out?”

The mammoth question, however is, will Modi’s move which has already cost Rs 16000 crores in minting new Rs 500 and 2000 notes sensitise and disinfect the align economy caused by the system of black money? Those tax evading black money holders might have taken precautionary measures by turning the black money into white in the form of gold, bullions, bonds, real estates, securities other assets or stocks months before.

Solutions on Benami, Benamisation, whatsoever had been sorted out well in advance. Even though it is said that the new Rs 2000 and 500 denominations are laden with hi-tech security features, there is no guarantee that the new notes will not be followed by fake ones and whether it will remain as a vicious cycle is the controversial topic as technology is on the rise every second of the day, for technology never sleeps.

Many politicians and financial experts have the opinion that Modi has gone nuts or nuts have gone inside his head. On the other hand many corporate bodies hail and praise Modi’s measure voicing their opinion that it is one good way of digitalisation of money. But which one is more important – corporates and common people? What about those residing in the far flung remote areas? About 75 percent of the population live in villages or rural areas, mainly earning daily wages in cash with many having no bank accounts. How about their hard earned few thousand rupees kept in their hands? They are the main sufferers.

Will digitalisation of money fill their stomach? Course, a cashless future is definitely on the card as many digital buying and selling players in the form of digital wallets such as Paytm, Mobiwik, mRupee, Oxigen, FreeCharge are gaining momentum in urban areas but its still a new concept in rural parts which comprise a bigger portion of the country. As of now digitalisation is an alien entity to them. The announcement by Modi regarding stoppage of 56 different kinds of taxes except import duty as a positive result of demonetisation, if materialised will be one right step to raise the value of the Indian rupee.

We pray that it materialises. But there is no guarantee. The irony is that the NDA government under Modi is unable to bring back the black money of the Indian billionaires from Swiss accounts as Swiss Banks have certain norms for maintaining anonymity of their clients. So, Modi preferred the option of demonetisation of 1000 and 500 currency notes which instead hits hard at the common people.

Course, Modi’s move has been partially effective at zeroing-in on cross border terror funding, drug smuggling, child trafficking, naxalite movements and the likes. It also succeeds in wiping away black money from many middle chum corepatis. But to those billionaires with black money amassed in Swiss Banks, it’s tantamount to a collision between an egg and stone where the stone breaks instead of the egg and in this case the stone is the NDA government. Some billionaires may be affected, but to them, the quotient of loss is just like a scratch on the skin, not even a slight cut.

Here is the right time to mention the proverbial Manipuri saying, “An adult elephant, no matter how thin will always be bigger than a buffalo” which applies perfectly to the present real world of Indian black money scenario. As AIBEA’s General Secretary CH Venkatachalam recently said “Everyone knows that black money is mostly in foreign currency, in foreign banks, in gold or in properties and less in cash. Hence, this step alone is not going to help in unearthing black money,”

As per Modi and his herd, the measure is indirectly a boon to honest tax payers though effective implementation in the short term may be a challenge. The rupee may become strong and high hopes abound that there will be economic growth in the right direction with the anticipation that demonetising high denomination notes can be an effective means of checking accumulation of wealth in cash. Some described it as a “revolutionary” step to cure us from disease of cash in our society ushering into a bold and decisive step towards a cashless economy.

But this will cause inconvenience to small traders and public who mainly deal in cash and may impact the economy due to uncertainty and lack of clarity on the proposed steps. Its true that in certain situations, success requires an element of surprise but his “master stroke” surprise measure seems a little bit too late. Its more like aiming for the stars but instead landing on the moon.

Most corporates welcome the Government’s move to weed out black money with the notion that the quantum of India’s economy moving through the digital pipes will witness massive growth. While the real culprits sit tight on their black money stashed away abroad or in gold, bullion, real estate, the million dollar question is, “How is replacing 1000 rupee notes with 2000 rupees notes going to make black money hoarding a lot harder? How will this move help in preventing the generation of black money?” If new income or wealth is unaccounted, will not that income or wealth be hidden in the Rs 2,000 notes? That’s something we have to think out loud.

Again, political groups have the notion that Modi’s move is a political ploy where assembly elections are to be held in January next year in some states (not BJP stronghold). To them, it’s a political motive where BJPs party fund have already been converted to gold, stocks and real estates so they will be big players in state elections and that 2000 rupee note is for that purpose. It is a lethal blow to the Congress leaders of Congress ruled states as their ‘to be’ party fundings for the forthcoming Assembly elections piled up in the form of notes are rendered useless. However, the problem of fake notes is also not going to be contained by this measure. So long as we cannot check the root cause of fake notes, new sets of fake notes will come into circulation.

Withdrawal of high-denomination notes is a radical measure the government normally resorts to in an attempt to counter forgery. It was done at least twice in India’s history. In January 1946, Rs 1,000 and Rs 10,000 banknotes were withdrawn. In 1954, Rs 1,000, Rs 5,000 and Rs 10,000 notes were reintroduced and were again demonetised in January 1978. This time, the attempt is to crack down on black money.

The present government is not in a position to measure the correct quantum of black money because those who have black money will undeniably convert it into new currency notes. Instead of demonetisation, the government needs to give paramount importance to improve on the infrastructure in digital economy as the foremost step so that the length and breadth of the country move toward electronic modes of payment thereby making it increasingly easier to track financial transactions leading to better service tax and income tax collections.

As per financial experts, ours is a nation where 98 percent of consumer payments are still made in cash and about a quarter of the economy is unaccounted for. So Modi’s pushing for electronic transactions to improve transparency which is welcome from many angles should be pushed more vigorously. Making India a cashless nation is the only solution to economic justice even though it is a Herculean task on the part of the government.

Else, the common people will always remain affected by diversionary measures such as demonetisation for common people who have small savings and no bank accounts will have their life savings targeted. As per Roller Coaster Write, the present demonetisation scheme will hardly yield its targeted result and the main sufferers will be the common people who are always in a lose-lose situation.