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Friday, November 11, 2016

Master stroke on black money to make India Swachch Bharat

Press Information Bureau
Government of India
Special Service and Features

09-November-2016 18:09 IST

Master stroke on black money to make India Swachch Bharat

Prime Minister’s sweep shot on corruption is the biggest ever exercise launched anywhere in the world to broom and clean up the economy

Crack down on black money would be a big deflationary move

            The mid night scrapping of Rs 500 and Rs 1000 currency notes , as                    announced by Prime Minister Shri Narendra Modi in his address to the              nation on November 8,  is being seen as a master stroke against black              money and  corruption that has been eating into the Indian economy like a termite for several decades.  The sudden announcement of a decision which may be well thought over several months with only a handful of the top  echelons in the government having a whiff of it, would cause some disruptions in the interim, but then as the Prime Minister called upon the people , it is the price each citizen is called upon to  pay for defeating the monster of corruption and black money which, combined with counterfeit currency and terror funding, can strike at the root of a nation. 

 “There comes a time in the history of a country’s development when a need is felt for a strong and decisive step,”   Shri Modi said. But for the Donald Trump victory, India’s war on black money would have created instant ripples the world over. In any case, the ripples of the Modi move to hit at the hoarders of ill-gotten money where it would hurt them the most, would be felt for the Indian economy far too long. 

While Swachch Bharat is being implemented for cleaning up streets ,roads  and building toilets ,  PM’s  sweep  shot on corruption is the biggest ever exercise launched anywhere in the world to broom and clean up the economy which was growing at the fastest clip among the global peers , yet yielding low results for the common people.  Imagine the scale at which the brooming exercise can clean up the system. By some estimates as much as Rs 14 lakh crore currency notes of Rs 500 and Rs 1000 denomination are in circulation and would be withdrawn by December 31, 2016 or at the most  March 31, 2017. 

Some bankers feel that there could be as much as one-third of this amount which may not be deposited with the banks, since taking the ownership of the loads of money stashed in gunny bags may land some people in trouble . Now that would mean the country gets a windfall of Rs 4.33 lakh crore which would accrue to the nation in terms of reduced liability of the Reserve Bank of India which will replace the surrendered currency that much less. 

Going forward, this huge cleaning up would lead to a much better fiscal position of the Central Government with several positives for the macro picture , the biggest being on the inflation front. As is common knowledge that inflation is fuelled by a large margins by the black money which finds its way into conspicuous spending on theme parties and building of assets like real estate.  In fact, the real estate market has been thriving only on the cash part of the deals which of course would stop, giving a jerk to the sector in the transit till it readjusts itself to the new reality. So, it is being rightly interpreted by the analysts that the crack down on black money would be a big deflationary move, ultimately helping the common people, who may have to go through some temporary pains . 

Besides, the decision to scrap high value notes would drastically reduce premium on corruption in the public services since the risk –reward would be highly tilted towards the peril of being caught off-guard. As enumerated in the PM’s address to the nation, the NDA Government has taken several other measures to check the black money in the last two years.  These include:  a law for disclosure of foreign black money; agreements with many countries to add provisions for sharing banking information;  strict law to curb benami transactions; and a  scheme for declaration of  black money after paying a stiff penalty.  As much as Rs 1.25 lakh crore has already been brought out through these efforts and if  we add another Rs 4.33 lakh crore which may not return to the banking system and become junk, over Rs 5.50 lakh crore , a humungous figure, would have been neutralized.  The benefits would certainly accrue in the medium to long term.

The only challenge for the government in the interim is to ensure that a minimum inconvenience  is caused to the common people and the banking system is geared up to instill a sense of confidence among the people that the common households’ money is very much safe.  

“Honest citizens want this fight against corruption, black money, benami property, terrorism and counterfeiting to continue. Which honest citizen would not be pained by reports of crores worth of currency notes stashed under the beds of government officers? Or by reports of cash found in gunny bags? “, a decisive Prime Minister said.  

He is so right when he says that in spite of  being ranked as the fastest growing economy in the world, India figures so high on the global corruption index. With so many steps having been already initiated, India still ranks 76 on this dubious distinction.

Even though initial reactions in the stock markets were adverse, as was expected, the sentiment was also related to the Trump victory which had spooked the global markets which would slowly digest the new global paradigm of challenging the status quo. 

The Modi master stroke would take India several  leaps ahead as being real Swachch Bharat  


   *Prakash Chawla is a senior New Delhi-based journalist writing mostly on political-economic issues 

The views expressed in the article are author’s own.

1 comment:

  1. Read carefully
    Line by line if u have wisdom
    If parrot of BJP then carry on

    Think of national if ur Indian by heart

    Be away from dirty politics

    ..... Please do not go on. Thanks. You probably are blind to facts. Notes of Rs 2000 are only circulated through banks, meaning against your balance in bank. Any transaction is recorded.
    If people suffer so be it. Labourer gets minimum salary per day. Which is 300-400 a day. In India, each person keeps some cash. Reduction of hard cash transactions is need of the day.
    Let us throw out negative thoughts and go with policy to eradicate black money.
    [11/11 7:05 am] Col Lamba: Parties in poll-bound states may 'bribe' voters before notes rot

    will become another scam .Currency converter scam

    parties will give to workers 2.5 lacs per person all old notes
    .Workers will work with zeal & zest
    party/ neta black will become white
    workers to deposit 80% money as donations to party fund

    no tax problems.
    easily all black becomes white
    handy in election winning

    Enjoy both side of cake

    Fin babu's poor performance
    confused mind & wrong approach

    PM will sack them

    Col lamba
    [11/11 7:07 am] Col Lamba: Wrong is wrong

    Tell me

    1) During DG fin & Guv RBI briefing DGsaid or words to that effect

    New notes will have Nano tech chip & can be traced by satellite
    Later on FM says there is no Nani chip

    Why DG fin gave wrong info to world in media & guv was silent on it.

    Why the left hand does not know about what is happening in the right hand

    2) Government has Abolished 1000 note & printed 2000 in lieu

    How does it helps the controlling black money & terror funding

    .Rather they will have now compact box of currency notes

    .When slogan is to ban high end note
    higher denomination note of 2000 has been printed
    3) There is no security change in new notes except changing of place of number in & colour extra.

    Why cannot plastic note be issued like Australia which had incorporated better safety

    4) Now they want to print 1000 note also
    So what has happened to slogan of ban of high end notes

    Confused mind & wrong approach

    5) How new notes of Rs 2000 are floating in south ( as shown in social media )even prior to launch if notes
    Horrible security & safety arrangement

    6)see the latest news

    Within 24 hours pak had published Rs 100 notes & are being inducted through Nepal+ Sri Lanka extra

    7) So now will government ban 100 rupee note also & dance to tune of enemies

    This is the level of working of high stressed babus .Pathetic

    8)Millions of poor are not able to buy essentials due to shortage of currency & state will continue for some time

    Do u know how many crores are lost with one day closure of bank

    Imagine when banks are not having sufficient currency what will be the damage to trade + services + production
    9)Why 200+300+400 notes are not being printed in plastic for better circulation & safety
    10) Why debit / credit cards are not being encouraged

    Give cess relief on usage of credit / debit card Save cost of printing of currency + transportation+ security

    God bless u All

    Col lamba