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ModiNomics

ModiNomics

In another seven months, India will face the Lok Sabha elections. One thing that people will remember about Narendra Modi will be the way he used data in every scheme he promoted and almost every speech he delivered. And the way the people questioned the data he shared. Some tweaked the way it suited them, some praised him and some even labelled the prime minister as  feku (the one who exaggerates about his achievements).

Minutes after Modi spoke from the ramparts of the Red Fort on the last Independence Day, we could see people debating the information shared on the national TV. 

One piece of information that Modi shared was how Swachh Bharat Mission saved the lives of three lakh children, citing a report by the World Health Organisation. People said THAT it wasn’t true as WHO used the word “potential” three lakh children. Never before, have we seen political debates going in this direction, reading between the lines, in fact, between the words.  

Similar data was used when Modi spoke on the evening of November 8 in 2016. He mentioned about India being called a “bright spot”, as stated by the International Monetary Fund and the World Bank. 

He then listed an array of schemes promoting his slogan  sab ka saath, sab ka vikas. While praising his government and his vision of development of all, he said we maybe at No. 1 position in terms of economic growth but we were ranked close to 100 in the global corruption perception ranking.

Building on this data, he urged everyone to stand with the government’s decision to scrap the 500 and 1000 rupee notes. Of course, he gave an option for exchanging the old notes with the new notes, thinking that those holding black money would not turn up as the per-person limit for exchanging the notes was only Rs. 4000.

While most of the businesses and small tradesmen suffered due to cash crunch, people got some commission in getting the 500-rupee and 1000-rupee notes exchanged from the banks. Standing in long queues, people suffered and Modi labelled them as heroes, little knowing that the black money that he thought would never land in the bank, was being actually deposited into different bank accounts. Suddenly, we saw the sudden gush in the money being deposited in the  jan dhan bank accounts, which were not operational until then.

The government had to make a statement that whoever deposited more than Rs. 10 lakh in an account without sufficient income proof would have to face the wrath of the income tax department as 200 per cent tax penalty would be levied. From the slogan of cashless economy, the government changed its stand from less-cash economy. Reports had started emerging that the government had failed to achieve its objective of both curbing black money and making India a cash-less or less-cash economy.

We remember how the RBI was forced to issue notification after notification to manage the monumental task it was asked to do. Initially, the apex bank declared on its website how much currency in circulation has come back to the banks. The moment the figure crossed more than 90 per cent, suddenly the bank stopped updating the information.

The suspense is now over. As the RBI published its annual report, the political debate on whether demonetisation achieved any of its objectives or not has resurrected. The report says that 99.30 per cent of the currency in circulation as on November 8, 2016, returned to the banks.

“The RBI report again proves that demonetisation was a ‘Modi-made disaster’ of epic proportions! Modi in his 2017 Independence Day speech made tall claims of Rs 3 lakh crore coming back to the system! Modiji, will you apologise for that lie now?” tweeted Randeep Surjewala, chief spokesperson of the Congress party.

Former Union minister Manish Tewari, too, spoke at a Press conference. Demonetisation was a “monumental folly” that affected the informal sectors and daily wage labourers. Other Opposition parties, including the Left and the AAP, also attacked the government.

The report certainly is a political setback for the Narendra Modi government which expected that Rs 3 to 4 lakh crore of black money would get extinguished outside of the banking system.

Now the government may argue that even if the entire cash has been deposited into the bank accounts, the income tax department has gained a lot from the whole exercise. Even if the entire black money has turned into white, it is not difficult to trace the origin of money and nab the culprits. They may claim that the process is on. But during this period of close to two years, we have not come across any data or information released by the income tax department as to how much black money has been traced so far.

Reports suggest that a few thousand crores were definitely nabbed under various raids so far. But what happened to Rs 3 to 4 lakh crore that was expected to be caught during the whole exercise? On August 26, 2018, Vice-President Venkiah Naidu asked the RBI and the income tax department to prove whether the money that has come back into the accounts post-demonetisation is black or white. “That should be done at the earliest so that the credibility of these reforms is maintained,” said Naidu.

The government is said to have identified the potential black money. But the biggest problem is to find sufficient evidence to nail the culprits, it seems. As no one knows who deposited whose money? And what happened to the revised goal of having a less-cash economy? The recent data released by the RBI on the currency in circulation shows the real picture.

Yes, people had adopted online payments or payment through PayTM as an option during the 50 days after demonetisation. We could see even a small trader having a PayTM account for accepting money for whatever product he/she sells. Even now the shopkeepers do have an arrangement for accepting digital payments but the data shows that currency in circulation has gone back to the pre-demonetisation days. In fact, there is an increase in the use of cash!

In other words, 50 days of less-cash did not change the habits of the teeming millions, as cash is in their comfort zone. The risk of losing money during online payments and PayTm accounts and, then, the cumbersome procedure of following up with the bank, calling the customer care, registering a complaint and then again following up is certainly discouraging. And hence the reversal of trends.

What about counterfeit notes? The RBI report does mention that there has been a reduction of 31.4 per cent in counterfeit notes seized over the year in Rs. 500 notes. But there has been an increase of 35 per cent in counterfeit notes in the denomination of Rs. 100 and a whopping 154.3 per cent increase in Rs. 50!

In other words, the second and third goal-post that the government had conveniently chosen to label the monumental exercise a huge success has also failed. 

Now consider this against the pain that was inflicted upon the Indian economy and the informal sector? There were massive job cuts. Supply chains were disrupted. Many had lost their lives, standing in the long queues, waiting for their turn to get the currency changed. And the GDP would have grown at least by 2 points, if Modi had not given his ill-fated speech on November 8, 2016, the day no one can forget.

Now the only way the government can save its face is by giving a detailed data and information on what happened to the black money. And this doesn’t seem to be an easy question to answer.

(The writer is a company secretary and can be reached at jassi.rai@gmail.com)

(Published on 03rd September 2018, Volume XXX, Issue 36)