Thursday 15 December 2016

Revolution by consent

Revolution by consent.
>
> M.D.Kini *
>
> “ Revolution is not a dinner party”  is a famous observation by the
>  Revolutionary Chinese Communist leader, Mao Tse-Tung. He was just
> highlighting the pain and suffering that a revolution involves. Every
> revolution has costs, and people suffer. If, at the end, the revolution
> brings better life for the people, the people will feel that the suffering
> is worth it. So it is with the demonetisation of higher currency by the
> Modi government.
>
> The Communist Revolution in China was a bloodbath while the revolution that
> Modi government has ushered in with the demonetisation of Rs.500 & Rs.1000
> notes is a revolution by consent. Yes, there are costs - some people lost
> wages, some had to stand in a queue for long hours, some unscrupulous
> people have used their workers to exchange their currency.  By and large,
> people have welcomed the move as it is in the larger interest of the
> country.
>
> PM Modi had promised to unearth black money hoarded in India and abroad
> during the election campaign. The NDA manifesto had mentioned it as all
> Congress scams were fresh in the minds of the people  - 2G scam, mining
> scam, CWG scam etc.
>
> Modi had taken it up at the international fora and had made changes in the
> bilateral agreements with many countries to trace it. He had provided a
> window to the holders of black money to declare and pay taxes and penalty.
> He had also spoken about other stringent measures as well.
>
> Bouquets and brickbats
>
> Dr.C.Rangarajan, the former governor of the Reserve Bank of India and Bric
> Bank Managing Director K.V.Kamath have welcomed the demonetisation. “ By
> far the most important outcome will be that ,” said former RBI governor,
> D.Subbarao, “ as the shadow economy merges with the formal economy, it will
> spur economic activity into a virtuous cycle.” Way back in 1923
> Dr.B.R.Ambedkar had recommended replacement of Indian currency every ten
> years to curb corruption and inflation in his book, “ Problem of Indian
> Rupee”. It has been hailed by Bill Gates of the Microsoft and Jyrki
> Katainen, Vice-President of the European Commission.
>
> There are voices of dissent as well. Some have said that black money would
> be generated after a few months or years. Most of the opposition parties
> such as Congress, CPI (M),SP and BSP have supported the objective of
> demonetisation but have spoken against its implementation which has
> inflicted hardship on people. While the government is ready to have a
> discussion on the issue, the opposition has stalled both the houses of
> parliament demanding that the PM be present and reply to the discussion.
>
> The Trinamul Congress and the AAP have called for “roll back” of
> demonetisation and have even organised protest rallies, and have made
> representation to the President of India, who has hailed it.
>
> Only two opposition parties have welcomed it -  Chief Minister of Bihar,
> Nitish Kumar JD (U) and. Odisha Chief Minister Naveen Patnaik (BJD).
> Overwhelming people of the country have welcomed the move of the Prime
> MInister to stem the tide of corruption in the country as revealed in polls
> conducted by an agency, V-Voter, and by the PM’s office. The local body
> elections held in Maharashtra and Gujarat have confirmed the support of the
> people for the demonetisation.The applause that Modi gets at his public
> meetings also indicate people’s support.
>
> Lok Nayak, Jaya Prasad Narayan had called elections as “ gangotri” (
> source) of corruption. It is to be hoped that Modi government would come
> out with a legislation to fund election by the government, and make it
> mandatory to have internal democracy among the recognised political parties
> to clean-up our political system. Internal democracy of the political
> parties is essential safeguard our democratic ethos.
>
> Some critics have opined that it could have been done without disrupting
> the normal economic activities of the people. “ Demonetisation politics, “
> observes Pratap Bhanu Mehta, president of Centre for Policy Research, “
> unfolds a vast morality play.” It's imagination unleashes the state on you,
> in the name of protecting your own virtue.”  He quotes approvingly the
> suggestion of Suyash Rai of NIPfP ( National Institute of Public Finance
> and Policy) to replace old currency with new within a period of three
> months to avoid costs to the public and the government itself. He has
> mentioned the cost of the exercise - cost of disruption of life, especially
> of the poor; cost printing and exchange of currency; loss of production in
> the industrial and agricultural sectors. This was also theme of the Former
> Prime Minister Dr.Man Mohan Singh when he spoke on this in the Rajja Sabha.
> He said there could be a reduction of 2% in GDP; it was a ‘monumental
> mismanagement’; a case of organised loot, legalised plunder of the common
> people; it may weaken the faith of the people in the banking system.
>
> However, we all know that after years of planned economy, initiated by the
> Congress, and supported by the Communists and Socialists, India became
> virtually ‘the permit-license raj’ where selected businessmen and public
> sector companies had a monopoly to produce goods & services, and sell the
> shoddy goods at monopoly prices. The result is, 400 million people are
> below the poverty line. This is the real legalised plunder and
> mismanagement of the economy.
>
> Things changed dramatically when PM Narasimha Rao liberalised Indian
> economy. The ‘unbound India” changed the face of Indian economy. Within a
> few years there were no queues for scooters, cars and telephones, and many
> other consumer goods. Indian economy raced forward to 8% GDP growth. “
> Indeed the Congress, which had control of the economy for over 60 years,”
> states the Former Cabinet Secretary of the GOI, T.S.R.Subramanian, “
> brought the country to its knees, and was primarily responsible for the
> hardship of the populace. Yet, it has shed the most tears for the ‘common
> man’. who was treated with great disdain hitherto.”
>
> Rationale of demonetisation
>
> “ There comes a time in the history of a country’s development,” said Prime
> Minister Narendra Modi In his address to the nation on demonetisation on
November 8, “when a need is felt for strong and decisive step. For years,
> the country has felt that corruption, black money and terrorism are
> festering sores holding us back in the race towards development.”
>
> Corruption and black money are the curses for all countries, especially for
> the developing countries like India. Shadow economy in the US is estimated
> to be  8.6% of GDP ( about USD 1600 billion) by the Word Bank. It is 12.7%
> ( about USD 1400 billion) in China; 11% in (USD 480 billion) in Japan; and
> 22.2% ( USD 500 billion) in India. When people do not pay their taxes to
> the government, they cheat not merely the government but the community as
> well as the tax money is used to provide social services to the common
> people - to build schools, hospitals, roads, railways etc. One of the main
> reasons why our country has so many people below the poverty line 79 years
> of Independence is the menace of corruption and black money. It has
> well-said that  taxation is the price we for a civilized life.
>
> There is  black money ( money on which tax has not been paid) and there is
> fake money ( counterfeit money printed by criminals and enemy countries).
> While the black money is a curse on the people, fake money is a great
> threat to the country, and its people. The black money and the fake money
> has been used by the terrorists, motivated and trained by Pakistan;
> Naxalites who prevent economic progress to reach the poorest of the poor;
> and the separatists in the North-East and Jammu & Kashmir. Then there are
> drug mafia and the anti-social elements. According to the Finance
> Intelligence Unit (FIU) of the Government of India, there has been a
> quantum jump in the suspicious transaction reports (STRs) during the last
> five years (2006-10 and 2010-15) - from 17,000 to 2,23,000. There has been
> an increase of 6.7% in the detection of counterfeit notes by the Banks and
> the RBI in 2015-16 -  6,32,926 from 5,94,446. The government wants to choke
> these activities.
>
> The RBI  has stated that almost 81% ( Rs.11.35 lakh crore) out of the Rs.
> 14.17 lakh crore currency in circulation has come back into the banking
> system as on December 7,2016. It has supplied new notes worth Rs.3.81 lakh
> crore. It has also released lower denomination notes ( Rs.100, Rs.50, Rs.20
> and Rs.10) amounting 19.1 billion pieces, more than what it supplied in the
> last three years. Demonetisation decision was taken to deal with the high
> quality counterfeit notes and to unearth black money held in cash, stated
> RBI Governor,Urjit Patel. The decision was taken after detailed
> deliberations.
>
> There are reports that some people have thrown the old notes in rivers, and
> some have used their workers to put them in their accounts. Some bank staff
> have helped in converting the black into white at a commission. The money
> in the Jan Dhan accounts have swelled from Rs.45,636.6 crore to 74,321.55
> crore since November 9. Government of India and the Income Tax Department
> have a big task to filter the accounts and punish the guilty.
>
> Origin of black money
>
> It all started with rationing during the second world war by the British.
> Not merely cereals but writing paper and things like that were sold in
> black market at that time. Scarcity is the mother of black money. After
> Independence, prohibition of liquor and the ban on gold import, later nylon
> yarn/cloth gave phillip to black money, smuggling, corruption, and
> gang-wars. Weapons and drugs were also smuggled by these gangs. Gangs also
> got involved in real estate to threaten the tenants. This money also went
> into film business.
>
> The web of black money and corruption has seeped into all activities in our
> country. Is there anybody in this country who has not paid black money to
> get a house/flat ?  Is there anybody in this country who has not paid speed
> money ?  What about the donation to get seats in the medical colleges ? Why
> our roads are in poor conditions ?  Why people have to wait to get a birth
> certificate for weeks ?
>
> Efforts have been made to deal with it. Many previous governments have
> given amnesty to black money-holders. They have not brought about much
> change in the situation. Modi government too tried to persuade black-money
> holders to come clean. The demonetisation of Rs.500 and Rs.1000 notes has
> dealt a death-knell to these people. All their cash has become pieces of
> paper on the night of November 8.
>
> Root causes and cure for black money
>
> Root causes of black money are two - scarcity and high rate of taxation.
> When there was abundant supply of scooters, black money for scooters
> disappeared. If there is enough seats for higher education, donations will
> disappear. Black money got an impetus when the marginal tax on income
> reached 97% during the regime of Indira Gandhi. After the liberalisation of
> the Indian economy, when P.Chidambaram brought down the taxation rate in
> his ‘dream budget’, income tax revenue increased. Chanakya had said that
> the ruler has to collect tax like a honey-bee which collects it without
> hurting the flower. Ruler should not kill the hen that gives golden eggs.
>
> The demonetisation revolution has offered an opportunity to all our
> citizens to start with a clean slate. If all major payments are made by a
> cheque, or the internet or by a mobile phone, it will minimize black money
> creation. If all government services are made available through the
> internet, interface between the bureaucrats and the people is reduced,
> speed money habit would come down drastically. It was started by CM Shivraj
> Singh Chouhan in Madhya Pradesh, has now been adopted by many others.This
> should be spread all over India.
>
> Modi, like Mahatma Gandhi, believes that fundamental changes can be made
> only when  people are inspired by an ideal. Modi, believes he can bring
> prosperity to the people by abolishing corruption and black money and seeks
> cooperation from the public Let’s join the battle for a better India.
>
>
>    -
>
>    M.D.Kini is a commentator on political and economic affairs.