The debate over good and bad of the sudden move of Prime Minister Narendra Modi to demonetize 86 percent of the Indian currency in form of high value notes in November last year has continued unabated. Economists with left leanings have counted several ill effects of the strong arm tactics adopted by Prime Minister without a regard to its impact on small sectors as well as on employment. The Nobel winner Dr. Amartya Sen had even condemned it as despotic action as it was an imposition by a single man desire. However several pro-rightist economists have come out in strong defence of the move. Both sides support or oppose the move in terms of political gain but not in terms of its socio economic objectives.
Instead the Prime Minister decided to extricate the hoards of black wealth inside the country. At least that was the avowed intent of the bold step. After six months it would appear that the net black wealth unearthed amount to Rs. 4000 crore in the economy with currency worth Rs. 14.78 lakh crore. The total unearthed amount, suspected and not proved to be non tax paid sum worth Rs 4000 crore. Even the right wingers are unable to justify the gain because they lament that tax men have been let loosed with extraordinary powers that were being misused to harass honest citizens.
Surprise is the defenders of the government are lamenting over the raid raj unleashed in the name of extracting the black wealth. Did they not know that every regime with unbridled power and without safety networks always end up in disasters. Power wielders are known to go astray and behave in berserk manners once they are empowered.
The government agencies played down the real impact of demonetization on small sectors including the fact that most Indian publishers put on hold their new ventures for at least six months as cash crunch for payment of salaries to lower staff had forced them to relieve of their employment. The pro-ruling party experts discounted all misgivings of bad impacts to point out that the GDP was slated to rise even at a higher pace during the current year compared to the last year as an evidence to claim that the major economic step had not caused disturbance to the economy. They overlook that the increases in the Gross Domestic Products are no more indicators of the economic development in real sense. The economic growth is now evaluated in social gain terms. The increases in white goods productions can and do inflate the gross national products but it does not help in life to the deprived class with lower income slabs unless there is enough production of essential goods to meet their life needs. The proponents of capitalism just ignore it to claim higher paced economic growth.
The demonetization has not ended the financing of terrorism in the country as they have found another method of financing their activities. They have now resorted to bank loots. Number of incidents of huge sums lost by few banks in the post demonetization era in Kashmir speaks of the new method devised by terrorists over which the intelligence bureau has no control. Even the third objective of weeding out fake currency notes has failed for the Reserve Bank figures of high value notes deposited in banks in three months after the demonetization speaks of it. The Reserve Bank statistics tell of more collection than the official currency in circulation prior to the demonetization. In other words, fake currency has been legitimized to the extent of excessive collection.
Rajiv Kumar of the Pune institute and director of the Pehle India Foundation has concealed the real reason for revival of the Indian economy in his long diatribe against other economists who had spelt doom. Rajiv Kumar also admits that revival of economies in other parts of the universe has helped increases in the foreign trade of India. He also claims that construction industry has also revived because of the launch of the ambitious programme of the Prime Minister for a home for everyone by 2022. But the cement industry is still suffering from sluggish demand as construction has not revived, only hopes have revived with many chasing the dream with their money.
He also admits the misuse of extra power given to taxmen. However the CBI caught a top taxman in Mumbai accepting bribe of Rs. two crore from a business house in Mumbai. Corruption is rampant in many wings of the government services. Tax and law enforcement agencies have earned notoriety for their habit of demanding undue shares to interpret favourably the law. Now they have been given license to make their slices.
In any case, both the politicians and pro-ruling party economists overlook the fact that black wealth is also generating wealth as it remains invested in production activities. No one keeps at home in cash forms their non tax paid wealth as it does not yield returns. People avoid paying tax only because they believe that every activity of citizens bears higher tax element and the revenue of the government is spent on maintaining 40 million families that are employed by the union, state governments, civic authorities and public sector units. Rajiv Gandhi as prime minister had said that of each rupee released by the union government only 14 paisa trickle down after the administrative expenditures. His statement was based on a study carried out in three districts in three different states. In each case, expenditure of the district was higher than allocations they received from various sources. Three districts were Kaira in Gujarat, Gulbarga in Karnataka and Gaya in Bihar.