Black Money Generation Continues Post Demonetisation

500 for 500 but 2000 for 1000 ?

It is now more than 6 months since the old currency notes of 500/1000 denomination became invalid. It has achieved the purpose for which it was undertaken- the hoards of black money became useless from that moment because the owners had never declared their possession nor paid lawful income tax on it.

Black money institutionalised corruption as the only way to do business in the India. It gave birth to a parallel government which undermined the government as by law established.

In essence, the parallel government encouraged all those activities which were prohibited by law e.g. smuggling, drug trade, human trafficking, terrorism, anti-national activities, circulating fake currency, abductions for ransom and crimes. It paralysed all wings of the government from minister to the ministerial staff. All revenue related authorities, police and bureaucracy in general were rendered dysfunctional. Had they been functional, the problem of black money would never have acquired such enormity. The Narendra Modi government has activated all revenue agencies after demonetisation. Now the question is: how long can this hold?

If Narendra Modi succeeds in winning another 5 years’ term from the voters in 2019, this arrangement will get formalised. Once the system gets strengthened, it will be difficult for any successor government to easily undermine it. Replacing an honest bureaucracy by a corrupt one will be as difficult and delayed as it has been for the present government to replace the old corrupt bureaucracy in every department with honest ones.

The parallel government marginalised the honest, upright and dedicated bureaucracy replacing them with the known corrupt or corruptible officials. The lawful government had no power to stop any attempt at compromising the integrity of the officials. Perception gained currency that nothing legitimate could ever take place without joining hands with the parallel government and its agents.

The Modi government was shocked to witness the audacity of officials and bankers at carrying on their corrupt activities fearlessly after demonetisation and 30 months of the transparent governance of the present government. Only the die-hard thick skinned corrupt people can dare so much.

Such people are not eligible to enter government service or continue. They don’t “serve” the people, they loot them. Therefore, they deserve to be thrown out of the system so that they don’t spoil it all. Once the Modi government firmly establishes the people’s faith that the corrupt shall be punished without showing any mercy, then only the system will be purged of corruption.

Otherwise, demonetisation alone will not be much of a success to eradicate corruption or effectively check generation of new black money.

It is so as nothing much would have changed in the remaining few months of Modi’s current term in office unless deterrence for corruption or black money is in place stoutly. With currency in the denomination of 500/2000 it would be all the easier for the corrupt to work with impunity and black money to be generated in the new currency.

At present, there is no law prohibiting hoarding cash in the high denomination 500/2000 new currency notes. The corrupt and the tax evaders will not take to digital transactions but the ordinary citizen would come to misery without cash in hand, as digital on a wholesale basis is simply a midsummer night’s dream.

The government has to prescribe some limit on cash holding with individuals & companies. They can keep all their money in their bank accounts, write cheques and use digital transactions. This way they will act honest citizens and the government will be fair towards them.

However, the source of black money is going to stay there in spite of the best efforts of the government.

There is no substitute for integrity and character of a person in society. Penal laws, enforcement agencies and law courts can hardly change individual attitudes and morals. All energy business whether coal, petroleum or LPG/CNG generates huge black money. Mining shall always remain a source of black money as expenses off the record shall never stop. Mines are located in distant places with poor infrastructure and local thugs extorting money. Left Wing Extremism (LWE) or Maoist threats are real danger and can’t be ignored by companies at site. Mining companies have always been soft targets for all varieties of extortionists.

Most professions prefer cash transactions because they don’t want to pay taxes. Even the Income Tax, Sales Tax, Excise Tax and Customs Duty lawyer appearing for a company in a court of law refuse to accept payment of his fee through cheque or digital mode. Doctors of high professional credentials as also private hospitals or other health service providers insist on payment in cash and shall continue to do so. Construction companies can’t stay in business by all transparent transactions. Private engineering, medical, management and other colleges and institutions are not going to adopt only transparent transactions. Film industry, tourism, hotel industry, transport, retail trade, consultancy, audit and accountancy will continue for long to generate black money.

Only the salaried class and the ordinary citizen will abide by the law in the hope that others too will do so. That they had been doing all these years. They were meanly exploited as was evident from huge treasures of 500/1000 rupee notes and gold bars weighing in hundreds of kilos. Has the present government of Narendra Modi anything on offer that it will not recur? If black money continues to be generated even after demonetisation, the scheme would fail in achieving its objectives. I can vouch on the basis of discrete surveillance in day to day transactions in the last 6 months in the market, courts, doctors’ clinics, architects, accountants, policemen handling criminal cases or manning traffic, excise, customs, income tax, coaching institutes, retail vegetable & fruit markets, poultry & meat sellers- all of whom deal in cash that crores of rupees in cash are exchanged which will boost the black money operations only.

The power of cash in their hands mocks the honest tax payer and hurts. When the government announces the scheme for “affordable houses” for the poor and low income groups at Rs 15,00,000 to 75,00,000 it ridicules both poverty as well as affordability. Clearly, black money scores over clean money!

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