One year of Demonetisation: Black Day or beginning of an epic war against Corruption?
Feature Articles

One year of Demonetisation: Black Day or beginning of an epic war against Corruption?

By Bhamy V. Shenoy

Modi stunned the world a year back on the night of November 8th, by scrapping Rs. 500 and Rs. 1,000 notes. The stated goals of DeMo was to fight corruption by unearthing black money, detect counterfeit currencies, reduce terrorism by cutting off their funding. On this Anniversary Day, we need to examine what we finally achieved. Congress party argues that this is a ‘black day’. This article shows that it is wrong. This is a bright beginning of an epic war against corruption.

I was one among those who supported DeMo from the very beginning and still believe that it was a good decision despite short-term hardships to many. As reflected by the election victory of NDA in UP, Uttarakhand and Goa, despite hardships, voters supported the NDA. This also shows that voters in general have confidence in NDA’s fight against corruption.

It is true that farmers did suffer along with many others. According to some experts, agricultural commodity prices fell as a result of DeMo.  For example, onion prices fell from Rs. 850 per quintal to Rs. 450, potato from Rs. 600 per quintal to Rs. 300 and tomato from Rs. 1,600 per quintal to Rs. 400 per quintal in some markets. It is rather unusual to see such reductions in three commodities all at the same time.

Experts also attribute farmers’ loan waiver to DeMo. Already Rs. 70,000 crore worth of loans to farmers have been waived. Merrill Lynch, a security firm, estimates that before 2019, Rs 2.6 trillion loans may be waived.

It is also true that counterfeit currencies detected were only about Rs. 41 crore while there is not enough proof to show that DeMo has resulted in reduction in terrorist activities. Thus two of the three goals are only partially met and there is still a question mark on the first objective of exposing corruption.

READ ALSO  Awareness programme on cashless transaction held

It is unfortunate that none of our universities or distinguished economists have conducted full-blown scientific analysis to study either the short-term or long-term impact of DeMo. Most of the comments on DeMo unfortunately are influenced by whether one likes Modi or not. Let us recall what Arvind Kejriwal who became CM of Delhi on the platform to fight corruption had to tell about DeMo. He stated supporting DeMo is an anti-national activity. What an irony!

Soon after DeMo was announced, some experts had predicted that about 20% of banned notes will not be deposited. This was based on an estimate that black money in circulation is about rupees three to four lakh crore. However, of Rs. 15.44 trillions of currencies scrapped, Rs. 15.28 trillion (99%) have been deposited. This does not mean that DeMo has failed to detect black money.

If the government succeeds in finding the sources of money deposited, it may ultimately lead to detecting black money. Finance Ministry has already found that a whopping amount of Rs. 5.03 trillion has been deposited by just 1,47,000 individuals. This works out to Rs. 3.4 crore per person. Why will anyone keep such huge amount under the bed? Will investigative agencies have the capacity to unearth the black money now? Will there be political will on the part of NDA without showing any partiality to enforce the rule of law?

Some other benefits of DeMo are as follows. Cash-to-GDP ratio has fallen from 11.3% to 9.7% which will result in reduced black market transactions and higher tax collections. Similar results will take place as a result of increasing digital payments which have gone up by 41%. 9.1 million new tax payers have been added after DeMo. 1.8 million notices have been sent to assessees to explain their sources of Rs. 3.2 to 4 trillion. Cash deposits worth Rs. 17,000 crore were made and later withdrawn by 35,000 companies which are de-registered. Scrutiny of these companies should lead to detecting illegal transactions. In the end, all these efforts will lead to exposure of black money.

DeMo has clearly shown that black money earned is not stored in the form of currencies, but converted into assets like real estate, gold, foreign deposits etc. Whenever raids have been conducted, only about 5% of unaccounted wealth has been found in the form of cash. Now the NDA government has started to investigate benami assets which should further result in detecting more black money and corrupt activities.

READ ALSO  Yoga Day Musings…

It is more than likely that a part of the drop in GDP following DeMo has been caused by Demonetisation – not to the extent of 2% as stated by former PM Dr. Manmohan Singh. It is also true people did suffer hardships. However, when a major surgical attempt is made to fight corruption, it is inevitable that there will be short-term pain. In hindsight, we can argue that with more planning, DeMo could have been implemented to cause less hardship.

When we weigh short-term harm (inconvenience of standing in line, and loss in GDP) with long-term benefits (higher GDP, less corruption), DeMo can be considered as a partial success. However, if the government succeeds in follow up and is able to unearth black money, continue to promote digitalization of financial transactions, expose benami assets, then DeMo could become a resounding success. Now that the epic war has started, we the citizens should give full support to any government which will continue it with a strong political will as demonstrated by Modi.

November 8, 2017

7 COMMENTS ON THIS POST To “One year of Demonetisation: Black Day or beginning of an epic war against Corruption?”

  1. Prakash R says:

    Mr. Modi was selling tea as per his own words. How can we expect such a person to lead the country successfully. Such things can only happen in old Hindi movies, not even in any other movies. He is hiding behind his talk-less-ness, irresponse to media and intellectuals, inner ego and to some extent helplessness too. Note ban was a monumental mistake as per Dr. Manamohan Singh our respectable previous PM of our country. He is an economist and under his able leadership our country prospered for 3 decades. The country was in a very good position when Mr. Modi took over. But he has already failed our country in just 3 years.
    Only Modi Bhakts are optimistic about his actions and not the general public. General public have suffered a lot due to note ban and not the rich people. Whoever comes to power, rich people never suffer, it is the low level and middle class that suffer the most. Organised sectors escape from such actions as they get paid irrespective of any change in the Govt., they get their pension etc., it is the unorganized sector which includes daily wagers, agriculturists, street hawkers, coolies, auto drivers are the most hit.
    At least our PM must have given an interview to media and took their questions directly and should have answered to all of them. But our PM hides from media’s direct questions!!

  2. Raj says:

    Those who are not happy with demonitarization should preserve their 500 and 1000 rupee notes! If the majority thinks like you, Surely Rahul Gandhi will be your PM and Robber Vadra will be your FM and the loot raj will return in its full glory! Last decade it was one major scam a month! They have missed 3 years of scams and looting as they had no power! Next time they are in power there will be one scam every week to compensate for the loss for 3 years! If they don’t win next time, they will be headed for prison!

    • Thethreewisemen says:

      For both of you: If Modi thinks that he would unearth black money, that he was at best delusional and at worst very naive.
      Persons of our vintage remember that even at the beginning of 1950s, corruption raised its ugly head, graftswere quickly sweeping through the systems of all institutions. An example was, one aggrieved window was forced to pay 25 rupees, a big sum in early 1950s, to get the death certificate quickly released-the work required was not done, as the clerk concerned wanted his “bakshish” to type a mere 5-sentence letter of this certificate. Since then, cash changed hands in various denominations for anything which needed to be done. This culture grew into monstrous proportions and businesses exploited this culture; hence the currencies of higher denominations started getting hoarded into suitcases under the bed. One instance was worth mentioning. One famous medical specialist in Mysore who working in the KR hospital, drawing the sumptuous non-practising allowance, ran a very successful private practice at home, accumulated suitcases of rupees; the IT raid took place (as his jealous colleagues became informers) and the raid team carted off the suitcases of rupees. Miraculously, all suitcases except 2 -the assumption was that they were used as handouts to the IT enforcement officers and the those in political power.
      The DeMO may seem to work for a short period, but in a place like India where corruption is institutionalised and has became part of the society’s culture, In summary, this cancer has become metastatic. I cannot see this working. The surgery may seems to work for a short time and the root cause of the disease is still there, surgery will have failed leaving only the pain for those who are the innocent victims.
      Modi may be a honest person, but that is one man. What about the others in his Party and in other parties? What about the administrative services at the central, local and in local governments? The businesses? Every one wants to become instantly rich, even to the extent of adulteration of food products that can kill thousands of innocent victims. That is independent India for you, 70 years after independence.
      Finally, we mentioned about the early 1950s. Kengal initiated the mammoth project of the Vidhana Soudha and the budget was massively over run. The talk of contractors getting very rich and Kengal’s involvement and his person wealth as a result, was brushed aside by an inquiry committee of whitewash. That was just within 10 years of independence.

    • theskywalker says:

      For both of you: If Modi thinks that he would unearth black money, that he was at best delusional and at worst very naive.
      Persons of our vintage remember that even at the beginning of 1950s, corruption raised its ugly head, graftswere quickly sweeping through the systems of all institutions. An example was, one aggrieved window was forced to pay 25 rupees, a big sum in early 1950s, to get the death certificate quickly released-the work required was not done, as the clerk concerned wanted his “bakshish” to type a mere 5-sentence letter of this certificate. Since then, cash changed hands in various denominations for anything which needed to be done. This culture grew into monstrous proportions and businesses exploited this culture; hence the currencies of higher denominations started getting hoarded into suitcases under the bed. One instance was worth mentioning. One famous medical specialist in Mysore who working in the KR hospital, drawing the sumptuous non-practising allowance, ran a very successful private practice at home, accumulated suitcases of rupees; the IT raid took place (as his jealous colleagues became informers) and the raid team carted off the suitcases of rupees. Miraculously, all suitcases except 2 -the assumption was that they were used as handouts to the IT enforcement officers and the those in political power.
      The DeMO may seem to work for a short period, but in a place like India where corruption is institutionalised and has became part of the society’s culture, In summary, this cancer has become metastatic. I cannot see this working. The surgery may seems to work for a short time and the root cause of the disease is still there, surgery will have failed leaving only the pain for those who are the innocent victims.
      Modi may be a honest person, but that is one man. What about the others in his Party and in other parties? What about the administrative services at the central, local and in local governments? The businesses? Every one wants to become instantly rich, even to the extent of adulteration of food products that can kill thousands of innocent victims. That is independent India for you, 70 years after independence.
      Finally, we mentioned about the early 1950s. Kengal initiated the mammoth project of the Vidhana Soudha and the budget was massively over run. The talk of contractors getting very rich and Kengal’s involvement and his person wealth as a result, was brushed aside by an inquiry committee of whitewash. That was just within 10 years of independence.

  3. theskywalker says:

    Profound apologies for the above similar posts with 2 different names . ” the threewisemen” is a group of 3 of us with extensive experience of living in Mysore and suffering under the multifaceted corruption culture, and we finally left the cesspit of India. We usually agree on a common draft and one of us posts it under the group name. This time, I messed up nt realising the common draft was already posted.
    As for the topic, Bhamy Shenoy assumes that one man-Modi can set right this endemic corruption. That is barmy to think that mere DeMO can do the trick, where the corruption is so pervasive in so many different forms and so firmly embedded in all institutions and in society, that nothing can ever be done. Dr Singh in a way expressed it-it is the sign of defeatism and a sign of reality.
    The higher denominations of rupees were necessary to pay for the inflated prices of goods and services, and also the inflated graft demands. The agricultural commodity prices quoted above for onions and tomato prices, even after their drop sounds ridiculous. That shows how worthless, the currency is. No wonder, a poster in the Kempegowda international airport, demands to be paid in US Dollars for ferrying the luggage. USD has already become the defacto currency in India. That is the situation, and no amount of boasting of IT advancement etc.. etc.. can mask it. The working class poor no longer cares for the independence dividend that India has showered on them, when the realities are so different.

  4. Siva says:

    Nobody including God can’t eliminating corruption! Demonitization was an honest attempt by a very selfless leader . Whether MODI failed or successful depends on whom to to ask all corrupt thug politicians of all parties, corrupt officials and media who survived protecting UPA government are all ganged up to show that a chai wala is unqualified! But a patriotic chai wala is much better than highly qualified looters under the corrupt Italian barmaid who was having the entire government under her thumb! They looted to the tune of 340,000 crore s and lost the election as the public was frustrated a x could not stand them any mor e! Now, the media and Congress supports are critizing as though Modi is Hitler and we need to bring back Rahul Gandhi and make him the PM?
    Root cause is, Congress institutionalized corruption for 6 decades and even God can’t fix in 5 years! But at least attempt to fix it be supported, nor ridiculed at every move, unless you are on e of the beneficiaries of corruption!

  5. What a world says:

    It is delusional think that only politicians are into corruption, and that it is a single political party alone that is responsible. Looking around the states, all political parties are into massive corruption. Look at the Tamil Nadu politics.
    Instead of pointing fingers at the political parties, every Indian has to look around and see how honest his/her office colleague is in dealing with the public or getting the paper work completed on time and help a poor window to get her state pension after her husband’s death, to refer to the example above. Rajiv Gandhi or any other politician was not responsible if the clerk demands money to get the paper work done. Typical “not me” attitude in India, and blame some one else!
    Greedy and get rich quick Indians are the villains. They are every where: in schools to get admissions, in hospitals to get doctor’s attention, in RTO offices to get driving license etc.., the list is endless. Corruption indeed has become an integral part of the Indian culture.
    Hence,the days of blaming only politicians are long gone. The days of looking for a messiah like Modi to cure this ill of the Indian culture is also long gone. It is very typical of India these days that every one wants to become very rich quickly whatever the means to achieve it. In this context, DeMo is a failed experiment. It is foolish to think otherwise. The dip in the agricultural commodity prices is transient and come the next 2 years, the prices will creep up again. Public service workers will find creative ways to get the illicit money to buy the newest models of IPhones.
    Give 50 years, this institutionalised corruption cannot be eradicated, not the society divested of its corrupt culture.

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending Posts
ABOUT

Mysuru's favorite and largest circulated English evening daily has kept the citizens of Mysuru informed and entertained since 1978. Over the past 39 years, Star of Mysore has been the newspaper that Mysureans reach for every evening to know about the happenings in Mysuru city. The newspaper has feature rich articles and dedicated pages targeted at readers across the demographic spectrum of Mysuru city. With a readership of over 2,50,000 Star of Mysore has been the best connection between it's readers and their leaders; between advertisers and customers; between Mysuru and Mysureans.