The Bold Voice of J&K

The outlawed currency; gain after pain

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Dr. Parveen Kumar

Prime Minister Narendra Modi deserves appreciation for his bold and historic move on demonetization. This is to go a long way in curbing the menace of black money, regulating unaccounted money ($67 billion as per Crisil rating agency), fake currency, terrorism and drugs. Remembering that Demonetization is a tool that enables a government to strips off a currency to be a legal tender. In fact section 26(2) of the Reserve Bank of India Act 1934 empowers the central government to declare any series of bank notes of any denomination to be used no more as a legal tender in the country. Earlier also in 1978, the then Janta Party government had stripped off Rs 500, 1,000 and 10,000 notes which at that time accounted for 10 per cent of the value of total notes in circulation. Now once again on November 9, 2016 the central government making use of the same section 26(2) of the Reserve Bank of India Act has made Rs 500 and 1000 notes which now form 86 per cent of the total value of notes in circulation as illegal
Definitely a master stroke in mid of the 9th November, he has tried to lessen the gap between the rich and poor. The post independence era in the country is going through a stage where the rich has become richer and the poor poorer. The rich had accumulated huge wealth and much of it was lying in foreign accounts. The government had given calls a number of times and many of them had in fact come from the Prime minister of the country himself. An amount of Rs 65,000 crore was also collected prior to this master stroke but this was much less as compared to the shadow economy running in the country. A report of the World Bank estimates the shadow economy as 23 per cent of the GDP. The black money thus becomes 34 lakh crore in 2015-16 of which the cash component is forty per cent which stands at Rs 14 lakh crore. Even if half of this black money comes out through demonetization, it will amount to Rs 16 lakh crores. Now, if this amount is utilized for providing basic infrastructural like health, education, housing, connectivity and other services to the poor; it will make a huge difference make Whenever something comes from the blue, aftershocks are there. The demonetization though initially caused some inconvenience to the common masses was welcomed by them as result of the most of the surveys suggested that 80 to 85 percent of the respondents were in favour of demonetization. A 92 years lady standing in a queue waiting for her turn to get the notes exchanged and she happens to be the mother of none other than the PM of the country was indeed an example. Peoples standing in queues for many hours waiting for their turn to exchange notes is an indication of the support the common masses has given to this scheme.
The cash less transactions cannot escape through the audit and other tax agencies which is not the case with transactions done through cash and this supports the parallel economy to grow with the country’s economy. Former Prime minister speaking in the parliament said that the sixty percent of the population do not have bank accounts. Now any one can guess who is to be blamed for this. The former Prime minister remained the Deputy Chairman of planning commission, Governor of Reserve Bank of India, Finance minister of the country and headed various financial related committees. It is better to leave this on his part to explain to the peoples how such a large chunk of population was kept outside the ambit of financial institutions.
Peoples who were criticising PM for doing nothing to eradicate black money despite having made tall claims are now raising hue and cry. They are those who have unearned income through illegal activities, who have evaded taxes, who have huge stockpiles of unaccounted wealth stashed abroad. Those who criticize the government for not making any preparation before hand; Prime Minister is very right when he says that they are criticizing simply because they did not get ample time to make any preparation to adjust their illegal wealth. The Bharat bandh, Presidential march and the protests have been given appropriate response by the peoples. In some areas there are reports that shopkeepers had offered to sell commodities at discounts on day of Bharat bandh. The government has also come up with another pro poor measures. It proposes another voluntary disclosure window under which there will be a levy of 50 per cent on the amount deposited post demonetization and 25 per cent of the amount collected will be parked for the poors in Prime Minister Garib Kalyan Yojana.
The unaccounted money is not only in the form of denomination of Rs 500 or 1,000 but the illegal wealth has been invested in huge properties, gold and real estate. Hope that the next surgical strike of the government will be on these ‘benami’ properties. Demonetization will bring some hardships to the masses but do we as responsible citizens cannot spare some hours for a measure which will boost economy and development of the country. It is a historical step to address a series of problems and promote transparency in tax compliance and increase government revenues. Prime Minister has decided to come down from the top. Furthering his commitment to his crackdown on tax evasion and corruption, he has ordered all his party MP’s to submit details of their bank records from November 8 to December 31, which is the deadline for submitting the illegal tender. Considering the seriousness of the government and steps it has taken to give relief to the peoples; it becomes our duty to cooperate till the system gets smoothened. The whole country stood in long queues braving all odds irrespective of their age, sex and political affiliations. Although there have been reports that some unscrupulous elements charging 50 per cent to convert the old currency. There were also reports of some suicides although these could have avoided and it is really unwise of those associating these deaths with demonetization. In the short term peoples will have to bear with some odds in their day to day life but economists do believe that in the long term it will clean the country’s economy.
(The author is from Advanced Centre for Rainfed Agriculture (ACRA)-SKUAST-J)

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