Shrinivas Dharmadhikari is a Management Consultant by profession with keen interest in Global Businesses, Geo-Politics, Social Equity and Secularism
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Critics feel that along with demonetisation the Government has also waived of large amounts of loans of some of their favorite business men, which if done in normal circumstance would have affected the liquidity of banks considerably
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The announcement of demonetisation of Rs 500 and Rs 1000 currency notes on November 8 by Prime Minister Narendra Modi resulted in 86 percent of the cash in circulation becoming null and void overnight. Its effects since the next morning have been quite chaotic with long queues of average citizens waiting to exchange Rs 500 and Rs 1,000. When the criticism over became loud the Prime Minister and his coterie of politicians, press and economists went on the offensive stating how bold and visionary this move is and how it will usher in bright future for all of us for which small inconvenience is worth in larger national interest. Among the several mission objectives stated by the Government the primary purpose is to unearth black money in the system and cleaning it up the system “once for all”. As the Prime Minister has publicly asked for only 50 days to make this transition and assured that normalcy thereafter with the new set of notes in circulation, it is only fair to wait until December 31 for the promised 'Achhe din'. A descriptor that does not inspire much confidence in this context.
However, it will not be ungracious to comment on the implementation of the scheme. Despite the kind of secrecy demanded in such operation, it could have been much better planned if the common man was the real focus. One major mistake has been introducing first the higher denomination Rs 2000 notes instead of Rs 500 for which adversaries attribute disingenuous reasons with a coherent set of arguments. These critics feel that along with demonetization the Government has also waived of large amounts of loans of some of their favorite business men, which if done in normal circumstance would have affected the liquidity of banks considerably. Hence the Government is holding back the public money within the banking system and delaying its withdrawal by rightful owners.
This argument may sound wild conjecture for many. Hence albeit a serious one, we keep it aside for the time being and look at what government plans to achieve as the stated primary objective and how sound the underlying logic is.
Most Indians across the socio-economic strata and with various levels of intellectual maturity construe black money as a “stock” of the currency of currency held in the trunks and basements by wealthy businessmen. Since the seventies, Bollywood movies have reinforced in common public perception this concept of Black Money which is there to catch if there is available on scene honest police officer or puritanical politician. In my opinion, self-seeking politicians and self-absorbed Indian elite have very systematically cultivated and perpetuated this common misnomer. This has been best described by world renowned American scholar one of Noam Chomsky’s in one of his famous book as follows
“The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow vivacious debate within that spectrum....”
In the present context, it is not unlikely that Indian elite, together with some leading economists are trying to define the spectrum with black money as “stock” held with few baddies. Just extract it from their coffers and system is clean once for all.
In reality, the evil is the black business and black money is its progeny. But unlike popular belief, it is not a congealed set of assets in the form of stock of currency notes waiting to be unearthed. On the contrary, those businesses illegal or perfectly legal who do not declare to the tax authority either its entire or part of its revenue are generating the black money. What is more dangerous is that it remains in “flow” alongside the white money. The root cause is the tax avoidance practice of many times clean looking business. Hence, the real villain of the piece here is the Black Business that needs to be detected and gone after in all honesty.
During an interview to one of the lesser known channels, renowned JNU Professor Patnaik quoted his intellectual idol Karl Marx who draws a distinction between a miser and the capitalist. While the miser believes that he will become rich by holding the money, the capitalist (businesses) believes that one becomes rich by throwing it into circulation. In other words, expanding his business. Hence the real clean-up will happen if we have political will that of the German state which once convicted for a financial misdemeanor, jailed father of the National Tennis icon Steffi Graff.
During the same interview, Prof Patnaik compared Modi Government’s attempt to unearth black money through demonetization with a proverbial king who to find out a murderer, hauls up the entire citizenry and starts inspecting each one’s hands one after another. The point he makes is that a good criminal investigation uses much more sophisticated diagnostics to reach the crime with minimal collateral damage. Besides the most critical ingredient of such exercise is the Political Will. Only a party which keeps businesses on arm's length basis and maintains a transparent relationship without any quid pro quo obligation can possess such a will
Having no hopes of a permanent clean-up of the system, I hope at least the present exercise results in some acquisition of black money left behind for lack of investment opportunities. But I don’t know why a statement of famous boxer Mohammed Ali keeps returning to my mind; Everybody has a plan till it gets punched in the face.
