Modi's Gimmick

Can Black Money be Arrested?

Anindya Bhattacharya

After failing to reap dividend over the ‘Surgical Strike’ on Pakistan and retreating on the one-day ban on NDTV channel, the Modi Govt has now come up with a new cosmetic strike of discontinuing 500 and 1000 currency denominations from the market. The reason cited is to hold on black money and cut the cash supply chain to terrorists.

Few elections ahead, Modi seems to have well calculated his strategy. In Punjab he will certainly loose and so his eye is now on UP. As we all know, elections in UP are highly cash-intensive and parties like BSP and SP are heavily dependent on money and muscle power. This money flows from the local mafias and the businessmen to SP and BSP and if that can be stalled then Modi thinks to be in advantage. His cancellation of currency denominations of 500 and 1000 is mainly centred on this agenda.

But is it not a drive against the black money as well? Will this initiative not curb the menace of black money too? This question is also hovering in the minds of the people. Let us see what is what in this area of black money is happening!

An estimate says that over US$50 trillion (about Rs 260 lakhs crores) of black money by selective Indians is stashed in the banks of Switzerland. How this huge black money actually works? How they are accumulated and transferred? These are few questions which may delve us deep into the world of black money and would prove that Modi’s strike is just a gimmick aiming at a particular reason.

Indian corporates are the main generators of black money and they have certain methods to do it. One of the popular methods is to under invoice their exports and over invoice the imports from tax haven countries like Singapore, UAE, Hong Kong, Mauritius etc. In this way, the promoters of the public limited companies, though holding only 10% of share capital, earn black money at abroad. Politicians, political parties and bureaucrats by taking bribes from foreign companies rout their money through hawala transactions. The MC Joshi Committee on Black Money constituted by Govt of India in its draft report on 30 January 2012 observed that the two major national parties BJP and Congress spend between Rs 100 to Rs 150 billion annually on election expenses whereas their stated annual income was just Rs 2 billion and Rs 5 billion respectively. The question arises, then from where the remaining money comes? Such instances can be cited more and more.

But now the pertinent question, what would be the impact of Modi’s move? Broadly, it would have few major impacts. As we know a vast section of rural and urban poor are dependent on cash transactions and in rural areas the banks are at far off place, so they would suffer at large in their daily transactions. Secondly, the black money in cash form stashed at home is not a very large phenomenon; rather, they are converted as gold and immovable property or kept in temples and Baba’s places. Most of the black money flow out of the country and the petty black marketers who stash it in their homes would have some initial difficulties but would soon disperse it in various ways to get their value back in other forms. Purchase of gold would increase thus already having a price upsurge in its market. After a few days, with introduction of new denominations of 500 and 2000, the same black money accumulation will continue again. Because, accumulating black money is inherent in our system and the political leaders, bureaucrats and businessmen are habituated and instinctive to this practice.

The most worrisome aspect behind this move has deeper implications. US being a country with 80% service related economy and a ‘friend’ of India in combating Pakistan desires that Indians be more prone to online and e-commerce and nourish their economy by purchasing their products. E-commerce will emerge as a threat to the small Indian producers and in this way our indigenous market will be put into shrinking. Cash transactions will be lessened and discouraged to demolish the economy of small producers of our country.

If the present government was at all serious of unearthing the black money then it would have not allowed Bijay Maliya and Lalit Modi to flee from our country. It would have nabbed the hawala operators. It would have, after the Panama Papers Leak, interrogated the persons whose names appeared in there. Shri A P Singh, the ex-CBI Director as said, ‘if the King is immoral so would be his subjects.’ The indication was clear. In February 2015, Indian Express released a list of 1195 Indians account holders and their balances worth Rs 25,420 crores for the year 2006-7 in HSBC’s Geneva Branch. The Govt just said that it would probe into the matter. And that’s how the matter ended.

Yes, few black money holders of middle and smaller rank would have some initial difficulties in disposing their money but that’s a passing phase. This move would have no impact except a chance of reaping electoral dividend that Modi is eyeing on UP. The Great Gamblers would roam freely as usual. The small farmers and traders would have a major loss. Modi is transforming India towards a digital one to serve the corporate and US interests.