Demonetisation – is it a scam with the common man?

Introduction

It is a fact across the world that 5% of population hold 95% wealth. The Swiss authorities released a list of 700 and odd people who parked their monies abroad in tax havens and the same received by the Government of India is considered to be a tip of the iceberg. The list alleged the name of Ambani’s, Bachans, Gandhi’s etc...

How did the Government act with this list? The common man felt that all political parties were very lenient and were reluctant to act. It is the Supreme Courts intervention forced the government to act. Somehow the action taken in these cases were wrapped under the shroud of secrecy like famous Hasan Ali case. In the case of Hasan Ali, the horse race gambler from Poona, the Income-tax Department in 2007 detected several lakhs of Crores black money parked in Swiss Bank account. No swift action was taken and till date, all the government collectively has failed to recover even a penny from this account.

The above picture clearly tells the story that the bigger malaise to our country is caused by a minority group of 5% who indulged in criminal act of siphoning the monies in by collusion with national and international banks who were both the conduit and carrier of sleaze monies outside India. Every Government including Modi Government has failed to get back the monies as promised and also act firmly with this minority group who caused grave injury to our country.

Government effort to demonetize is an effort to recover 5% of black money stored with 95% of population is being questioned as it is affecting the common man. When Government has miserably failed to act against the minority who are rich and powerful, then it is incumbent on the government to provide the same level playing field to 95% of population who holds 5% of wealth. The success of any drive is usually based on Pareto's Law of 80:20, where 80% of malaise can be treated by tackling with 20%.

Since independence, our countrymen are having the habit of dealing with cash irrespective of social strata one belongs to. Secretly saving the monies is the usual habit of any women for their grey days. Many poor and ignorant people do not have faith in banks but end up storing their earning in cash. The incidence of the saving habit can on. Apart from this, the society consists of people having black money. So in all the wisdom Government should have made a sensible move by demonetising followed by a voluntary disclosure scheme and not otherwise as it is an accepted fact the parting with money is very painful for any person. 

How the Government will justify that the minority crooks who parked the monies outside have got away and the common man comprising individuals across the section of society, who believed in keeping the cash inside the country, are having fish bone in their throat. This is where Government went wrong as VDIS should have been declared after demonetisation as it somehow would have given the majority holding 5% of wealth a feeling to let the cash go not out of hopelessness but with some degree of dignity and enthusiasm.

Certain section of political class believe that the BJP party leaders had advance information about demonetisation, which enabled them to convert their cash much prior to Modiji’s declaration. If government needs to come out clean then it has to bring a JPC to probe all huge deposits of cash through RBI with every bank. This gesture of BJP will reaffirm the common man and also vindicate that BJP is not party to any foul play but is genuinely concerned for eradicating black money from society.

The Government can easily go after the minority section that hold 95% of wealth in two pronged strategy. First, by going after all the national and international banks who have laundered the sleaze money out of India, just the way United States of America government did. We do not need the list of black money from outside, because money has gone out of India only through banking channels. Therefore, just allow the Income-tax Department a free hand to probe all banks especially foreign banks on money laundering. The US Government did the same and imposed heavy fines on HSBC and other banks involved in this murky affair. 

Secondly similar to demonetisation of currency drive the government should start again a demonetising drive in real estate sector so that entire sleaze comes out once for all.

Banks stinks

Banks are the real conduit and genesis to the problem of black money because without them the mess would never would have happened. Cooperative banks also have their fair share in this muck. In siphoning of the monies the banks made the funds available to the same minority group of 5% population who holds large corporate houses. The 95% of industry comprising SME’s (small and medium enterprise) never had access to funds. This created double jeopardy as the rich used the funds in cornering important assets (like mining, telecom licences, oil and gas wells etc.,) of our country with absolute control. On the other hand the same group failed to perform on these assets which prevented India to a rapid path of industrialisation. Fight of Ambani’s with CAG for KG Basin, Coal mining Scam, telecom scam is all part of the Bank Malaise as the crony capitalist used bank monies to corner the licences in front companies and used the same licenses with exorbitant valuation to raise the money from investors and public.

Banks lending to rich has created maximum NPA’s. All along Banks failed to recover these amounts as they were not only lenient but were part of window dressing to keep their skeletons in their cupboards. By not writing off the NPA’s at the right time in their books led to artificially jacking the price of real estate. On one hand it comforted the banks in showing higher value of NPA in the books and on the other it allowed the real estate mafia’s to artificially hold higher prices of this NPA. The common man knew that the bank is playing foul and protecting its own skin and shielding rich businessman, politician and the underworld who had parked lot of money out there.

Now the banks are out cash. If the NPA’s are actually written off then many banks will become broke and insolvent. It is also alleged on the Government that banks are getting pooled and merged as the government knows the extent of malaise inside the banks. It is also known to the Government that by working backward anyone identify the origin of the problem. So it is alleged that by merging the banks, demonetisation, cap on withdrawal moves are cover up operations which is Government’s hidden agenda.

The demonetization move of the Government and the cap on withdrawals has increased the money supply in bank. The banks without any effort on their NPA collection are sitting on funds for disbursal. The scam in the offing is that the money supply is literally being looted from common mass by preventing them to withdraw their own money. This again puts a speculation on Governments move that the banks are gearing up to finance the rich having large industrial house, who are the real progeny to creation of black money.

The challenge to Modi Government this time is to show by action that disburse of funds will only fuel SME’s sector which holds the key for rapid industrialisation and creating employment. The common man also expects that the government with this windfall gain must bring down the taxes, bank rates and create infrastructure to pave the way for next generation reform.

India a cashless society now a myth

The existence of cash is inversely related to the development of any society. India is a country where more than 70% population still lives rural areas. Therefore, the common man buys food, clothing, medicine and other needs by using cash as their average earning is still in few thousands of rupees. Every economic activity around the common man is interactions that are at the lowest at the level of development which is connected with cash-centric society.

It is necessary for a country to develop not only banks for a cashless society but have sound infrastructure for power, roads and other amenities. It is possible to integrate every economic infrastructure once the development is complete. Emergence of a cashless society cannot be immediately mapped with Digital India campaign because it is not the presence of the platform but the absence of culture for shifting to plastic money shall be a challenge. The resistance by a common man for this cultural shift may take a decade time just the way the common man experienced the mobile technology and the cable TV.

I am positive about the demonetisation as the misery is only for a short while and great days are ahead all of us. But this period is a tough time for a common man and during these hard times if government at the earliest match and sync with the required money supply without any hindrances then common man can easily be won over. The Government should immediately remove all caps on withdrawal so that economic activity which has come to standstill can restore peacefully. This move will also re-establish faith of a common man with the Government.

I am of the view that in all likely fairness the government should give the same treatment to 95% of population while handling the black money inside the country with the similar approach matching the action taken by Government with the minority group who were having the black money outside the country.

Will the government strike this balance is still a likely question?

Hari Rao

25.11.2016

0838hrs