Demonetization to Mass Molestation

The year 2016 ended with a not so  good word “demonetization” and the new year begun with a pair of very bad words “ mass molestation”. If demonetization highlights inefficient planning and execution by our policymakers, the case of mass molestation in Bangalore presents India’s most progressive city in poor light.

Except for a formal admission by the Government of India, it is amply clear that the demonetization drive has failed. So far the Government has not divulged any figure– the amount of old notes deposited back into the banking system, the number of people who would be brought under the tax net and the amount of incremental tax revenue to be collected by the Government as a result of demonetization. Rather the Government is trying to change the demonetization narrative as an effort towards a cashless or less cash economy. Even the media houses close to the ruling class have started criticizing the Government for avoiding to tell the numbers for fear of admitting the failure.

The numbers told to us during the demonetization process also fail to convince us. In the first couple of week the amount of banned currency value  in circulation  was kept at 14.5 lac crores  by all experts and commentators including people from the ruling party. Subsequently when the deposit flows continued uniformly the figure was revised to 15.5 lac crores. But here the unit of measurement is “lac crore” and by what yardstick we should accept a margin of error of 1 lac crore. We observe that yearly budgets of states like Assam, Chattisgarh, Jharkhand and Punjab are below 1 lac crore. So  is it worth discussing the numbers coming out in course of the demonetization exercise?

The government primarily wanted to curb black money by demonetization. The black money is earned by illegal means and then its tax is evaded. As a layman my understanding is that illegal income has to be curbed at the time of doing the illegal act.  Similarly tax evasion has to be prevented by efficient tax administration. During the demonetization exercise the Government remained a mute spectator when people kept depositing their black and white money .Though the Government has not declared anything, perhaps Income Tax department will be left with the near impossible task of scrutinizing lacs of accounts and identifying the culprits. But loopholes and escape routes are many , such as agricultural income and some tribes are exempt from taxes etc.

Indirect tax evasion is like a routine business practice by small and big trading houses. I was hopeful that the demonetization would be a big blow to this section. But nothing  seems to have happened as it is business as usual today. So they have clearly outsmarted the Government (or was there a match fixing?).

The Government of India got it wrong again when it tried to tell that Jan Dhan Accounts were used for depositing black money. There are 25 crore Jan Dhan Accounts and total deposit of less than 90  thousand crore. So the average figure of just over Rs3000/ is nothing abnormal. Therefore the Government should change the narrative here by stating that demonetization has developed banking habits in people who were financially excluded till recently.

More disturbing are the reports of new currency note hoarding by bank and Government officials. It is an irony that when the war against black money is on, the vicious cycle of black money creation has been led by people at the forefront.

The changed defense of Government of India on demonetization by points such as  less cash or cashless economy, anti terror measures, curbing fake currency etc are far from being convincing. Less cash economy will happen subject to adequate digital literacy and infrastructure. We should not expect this to happen in fifty or hundred days. For a permanent solution, terrorism has to be addressed by political and economic or even by law enforcing measures.

I wanted to start the new year on a positive note. But the circumstances are such that it is difficult to get some silver lining. Only hoping that a better year is ahead and acts of rape, molestation, black money hoarding will not appear in the media and the perpetrators of Bangalore incident will be  brought to justice soon.

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