What do politicians do to stick to their ‘kursis’? They spend most of their time playing to the galleries with an intention to keep their vote bank intact. For example, can you expect Mamata Banerjee to stand up for the rights of the Muslim women by opposing triple ‘talaq’. No way… right? Because, the conservative Muslims, who are mostly influenced by the ultra-conservative Islamic clergy, constitute her vote bank. In the same way, can you expect the Prime Minister, Narendra Modi, to act against the interests of the trading community? Common sense says that he would not. However, the unexpected and unthinkable indeed happened. He took the decision to demonetize the Rs. 500 and Rs. 1000 notes, which is intended to unearth the enormous amount of black money that is circulating in the economy. If we view the entire thing from this perspective the Prime Minister’s decision is indeed a courageous one because he has taken it at the risk of antagonizing the trading class which constitutes his party’s vote bank.
India is one of those countries where a large amount of unaccounted aka black money is in circulation. This black money criminalizes the society, widens inequalities and imposes an unnecessary burden on the honest taxpayers. In India, the salaried class appears to be the beasts of burden, who studiously file tax returns as their incomes are recorded in the payroll accounts and most of their economic activities, which are routed through payment card networks and digital wallet platforms, are to a great extent transparent. However, there are many people who get a lot of income from various sources and amass wealth but don’t pay any or very little direct taxes to the government. All this unaccounted money is either hoarded in hard currency, or sent abroad through ‘hawala’ channels, or invested in bullion or real estate.
The sudden demonetization announcement made by the union government caught the currency hoarders off guard and left them gasping for breath in their effort to whiten their black money. If we think that they are completely immobilized and the problem is resolved, we are thoroughly mistaken. They are coming out with many ingenious methods to convert their black money into white. They booked expensive A C class train tickets and luxury class airline tickets only to be cancelled later, they invested in bullion overnight, exploited the poor people to park money in their ‘Jandhan Yojana’ accounts and planted their men in the serpentine queues in front of the banks to exchange banned notes with the new ones. And they will continue to invent such ingenious methods to park their ill-gotten money in various avenues even in future. So the fight against the black money is a long drawn out war and the demonetization is only the first step in that direction.
The best way to curb the accumulation of black money and the growth of the parallel economy is to encourage people to go paperless. The use of plastic money, such as the debit and credit cards and the use of digital wallets make the financial transactions much more transparent and also result in the widening of the tax net. However, this is not going to be an easy task, considering the fact that most of the rural economy still runs on cash and the people in rural areas are not adequately tech savvy to graduate themselves from traditional money to plastic money.
The demonetization, though subjecting the people to temporary hardships, has the potential to bring about many positive changes in the economy. The commercial banks, which are inundated with a lot of low-cost money, may lower the interest rates in future. The ease in interest rates will eventually result in increased investment spending, which will in turn give a boost to the economy. As the money supply has shrunk in the economy, the inflation rate may get reduced to a certain extent. The demonetization and increased vigilance by the intelligence agencies have sent shivers down the spines of currency hoarders. This will definitely result in a decrease in the circulation of black money and the consequent widening of the tax net.
To conclude, the demonetization decision, though not going to eradicate black money problem completely, is a step in the right direction. Considering the fact that the fight against corruption and black money is an extremely difficult task, the Prime Minister deserves appreciation for taking the bold step. People must not forget the fact that they voted him to power with an expectation that he would curb the black money and bring about transparency. This is the right time for the people to strongly support him at this crucial moment so that he can stand tall against the odds and find strength to go after the corrupt and the dishonest. Otherwise, the country will lose the golden opportunity to put an end to corruption and cleanse the economy forever.