Black Money is not as black as the name sounds. Defeatist mind always searches for excuses to justify failures and villains to put all blame on. Over centuries of foreign invasions and dominance, Indian mindset has also drifted from Gita-brand of valor to this kind of excuse-hunting. Few years ago, it was population that was ’cause of all Indian miseries’. Nowadays it is ‘black money’.
To me, this entire obsession with black money is a significant distraction from core issues facing the nation, and weakens our ability to bring real change.
Black Money is a misnomer
Black money is simply money not accounted for in books of government agencies. It is not necessarily out of a willingness to cheat the nation. In fact, for 99% of common citizens, it is borne out of necessity of smooth transactions. When you ride an auto, when you eat Bhel-puri, when you pay housemaid, when you give shagun to children, when you drink coconut water on a thirsty day – you are generating black money. If you were to generate bills and keep trail of every petty transaction you do, you will rather prefer to avoid the transaction in first place because of inherent cumbersomeness.
Or maybe, you being an elite educated enlightened lucky chap with ample time, can still insist on doing all this like some retired people love to travel in trams in Kolkata that take hours to move an inch. But for most Indians, this is a luxury that will directly impact their bread and butter.
What you term as black money is simply a convenience that ensures that economic activities continue smoothly without bottlenecks. And hence when you try to stop ‘black money’ at all levels, you make life hell for majority of nation-loving common citizens who have no intention to do anything rogue.
Currency Notes is not Wealth, it is lubricant
Currency notes do not make nation rich. It is just like the lubricant used in an engine. If you reduce the lubrication, the engine will work inefficiently, pollute more, shout more, vibrate more, and die quicker. If you put too much, it will slip away from what it is supposed to do.
But lubricant is not engine. Currency note is not wealth.
Wealth lies in economic activities that generate value for some entity by fulfilling some need or want. Currency is just a medium to achieve this and smoothly transfer it.
If you engage in value-enhancing activities, if you solve problems facing world, you become rich.
Redistribution of currency – as much tempting it may sound – does not make country rich. It is like distributing one loaf of bread among hungry pack of ten dogs. You may fight, snatch, create new models for equitable distribution. But you have to live with one loaf of bread. You may issue currency that enables the dogs to own a piece of loaf in proportion to currency they exchange. You may make every dog a millionaire by giving them more currency. But still all they can do is live with one loaf of bread. You can shout foul and say some dogs have hidden extra currency and hence are hoarding more pieces of the loaf. And hence demand that everyone disclose their currency. But still, you have just one loaf of bread.
Real wealth and prosperity would come if you indulge in generating more loafs of bread. But time is limited. Energy and resources are limited. Either you use them for redistribution or for wealth creation. The history of world shows that what actually worked for successful nations and societies and individuals was not redemption of past crimes by socialistic redistribution, but by becoming wealth-creators. America became America not by redeeming villains of gold rush, but by becoming intellectual, financial, technical hub of world.
If India has to really grow, we need to optimize our time between wealth creation and currency redistribution. In my estimate, months of non-productivity and energy drain over currency exchange would do more loss than gains out of extracting imaginary villain of ‘black money’ from crores of common citizens.
Hiding taxable income does not necessarily make you villain
I know many socialistic friends will want to kill me for this. But this is true. Tax-system is an arbitrary system created without thorough scientific studies or statistical estimations. India has one of the most complex tax systems in world. So complex that 99% of Indians will not be able to fill tax forms even if they want to. They will have to hire an ‘expert’ for this. This cumbersome process just diverts resources and energies to non-productive work that does not add to loafs of bread.
The tax slabs and rules are all arbitrary and do not reflect realities of economy. They are a complex mix of quick fixes, poll promises, buttering certain lobbies, fulfilling selfish needs of politicians. So complex and arbitrary is it that even the experts fail to understand nuances of income tax, service tax, VAT, blah blah. Several disputes are settled through court cases where even certain provisions of tax system have to be struck down. In other cases, either you keep fighting with different tax departments or get your problems settled through a bribe and continue with productive work that helps economy.
Further, for last 70 years, what we have witnessed is a darker ‘blacker’ reality at end of the tunnel of this arduous process of giving tax. No, I am not talking about blatant corruption in IT Department that every small business would have witnessed. I am talking about the utilization of this hard-earned money that government collects from common citizens. Hardly ten percent is utilized for things apart from feeding the corruption chain.
Few years ago, Economic Times published my research on delays in central government projects. The cost of these delays is more than the income tax that government aims to collect. As a nationalist, every sensible citizen will question – why should I pay to feed the ever-increasing bellies of scammers. Why should I pay for lavish life of next seven generations of netas? Why not use for better purpose and for people I know I can care for?
The reality is also that bulk of charity work that happens in nation is also through this so-called ‘black money’ or kachche ka paisa. When Narendra Modi decided to stand for PM in 2014, bulk of funding happened through this cash aka ‘black money’. That is reality of every political party. They don’t give receipts for paying and feeding the crowd they purchase for their rallies.
The way corruption has ruled our system for last 70 years, it is the tax collected that has been more ‘black’ than ‘black money’.
Tax is not necessary
Tax is not as important as it is made out to be. Perhaps it was a necessity in old classical definition of economy. But is definitely not a proven symbol of sainthood in modern world. The world today is driven by innovation and speed. Anything that stifles this speed is real villain of economy. Paying tax does not generate wealth. And hence, even the government provides tax holidays in sectors it wants to promote. Many economists are proposing tax-exempt or a very low tax model of economy that incentivizes people to indulge in wealth-generating activities and hence produce more loafs of bread. There are some tax-exempt nations in world where you either pay nothing or just 4-5%.
From this perspective, people who hid taxable income may be termed criminals from legal perspective. Even Bhagat Singh was technically a criminal and hence Gandhi did not push for his release. But he is a hero because he did what was a noble act for future India.
I don’t mean to say that all tax-hiders are Bhagat Singhs or they even indulge in tax-hiding out of a higher moral call of patriotism. But definitely, not all of them deserve to be made ‘black’ criminals.
Cash is not king
When it comes to black money, cash is the smallest villain. Gone are the era of seventies and eighties where people would stash cash under beds and in commodes. Now hardly a small fraction (around 5% as per some studies) is actually cash. Rest is already converted in other forms. Barring few cases, cash is primarily the working capital kept to speed transactions for most Indians.
Real issues are different
The bigger issue facing us is fake currency that is used for terror financing. A relatively smaller issue is that of hoarding of massive amount of money by some big-shots. These big-shots fund elections, finance jihadis directly or indirectly, and pay for their own luxuries at expense of common citizens. As is true with most systems, they are a small minority and can be relatively easily tracked without disturbing rest of the population. In fact they are so closely enmeshed with political system that most governments clearly know who they are – either as friends, enemies or opportunists. In many cases, the two issues are interlinked because the big fishes in both are same.
But when you disturb the entire population to catch these few sharks, you create enough distractions for the big fishes to outsmart the rest.
Also, if India has to transform, neither Make in India will help nor Black Money collection. What will help is the ability to create wealth – more intellectual property, new products and services that sell in world, new businesses, new innovations. India has wealth of it.
If India promotes teaching of Sanskrit as the next cool way to sharpen brain, there is huge demand globally to generate far more than any cash deposits.
Demonetization – good or bad?
When there is so much of fake currency floating around, its a no-brainer that trashing these fake notes is unavoidable. But success of demonetization depends not on number of old notes collected in banks but on smooth execution of demonetization process without impacting productivity of people.
This is where the present government botched up big time. It seems the entire execution happened in a short notice as an after-thought. Professional project management was not adhered to and hence the way it is being carried out cannot be excused by showing dreams of paradise in post-demonetization world.
One, the productivity of country is stalled for at least two months and after-effects would last even more. This needs to be compared with gains from the entire exercise.
Two, the big fishes have already jugaad to wiggle out. Through collecting cash via their hired people to converting cash to other forms.
Three, the sudden crunch of cash is affecting those who do not have cards or online banking facilities. Think of people who come from far-off villages to a cancer hospital bringing cash to save lives of their child or parent. Now a private hospital will not accept Rs 500 or Rs 1000 notes. And they are stuck. Every moment of delay is like a ticking time-bomb. The long queues and commotion brings delays that will never get reported but would have killed many.
Since current government loves to have Gandhi as mascot, they must remember what is written at Raj Ghat – that your policy and masterstrokes and arrogance be at level that ensures the most deprived and vulnerable one is cared for.
For a father, life of his baby is more precious than net wealth of entire black money of world. For government, that is father of entire nation, there is absolutely no excuse to put even a single life at risk for its monetary policies – whatever be the price.
I pray that those who differ with me on this never face a situation where they saw their mother dying in front of their eyes just because there was a road jam that delayed her ambulance to hospital because people were making long queues to take out Rs 4000 to pay their groceries.
The moment we lose a life for an experimentation like this, we lost the purpose behind this all.
So yes, eradicate black money. Do it through demonetization or whatever other means. But without any life-threatening, career-damaging, health-ruining inconvenience whatsoever for a single citizen of nation.
So what should be done?
Make more thought-out and well-executed plans. Don’t think of demonetization just because there was already a plan to release Rs 2000 note. Do the sensitivity analysis. Liquidity Risk is biggest risk facing financial systems today. Don’t play with fire.
Make action-groups and emergency groups at all levels. Make sure banks are ready to serve customers 24*7 till process is over. You cannot close banks on Guru Nanak Jayanti or even at 9 pm at night in such emergency times. It must be 24*7 non-stop. No lunch, no dinner, no tea. Have as many shifts as needed.
Also, don’t reshape notes because cinemascope notes look cool. Don’t assume that shape change will prevent counterfeiting. In fact, irony is that RBI states that even existing notes could not be duplicated. It is just that people could not differentiate. So same would happen with existing notes. All we have done is to postpone that for a while.
Because of this reshaping, ATMs are not ready.
And yes, issuing Rs 2000 notes in a liquidity crunch is bad planning. Makes situation worse. I read the logic given by one CA from Gujarat why Rs 2000 note was a masterstroke. But it is flawed. It assumes that banks have no way to identify whether notes deposited are old ones or new ones. And hence one can keep depositing old notes multiple times and show it as return of withdrawal of new notes. And hence make black money white.
First, in a limited time, even if one does so, the amount will not be huge. Because our real enemies are big fishes not small frogs whom everyone wants to eat.
Second, banks use core banking systems that use ISO transaction standards. One can put a transaction code to clearly identify which transaction gave old notes and which gave new notes.
What seems to have happened is that RBI was already planning to launch Rs 2000 notes – cool cinemascope design. Then someone was struck with an idea – perhaps the PM. He called everyone, and shared his plan. And everyone said, “Yes, Minister!”. Public convenience was put on back burner. They executed whatever they could. And botched.
It seems the Kejriwal type of enlightenment is affecting everyone these days.
But we collected lakhs of black money
Wrong. Banks collected legitimate income of people that they had taken out as cash. One small part would have been so-called black money. If government would declare tax-holiday, same money would become white money and could have come to economy in other productive ways.
Yes, Income tax department conducted raids. But raids could have been conducted even without demonetization.
All that has happened is that an artificial liquidity crunch has been created. People are emotional about the issue and hopeful that this will make them millionaires. And hence rhetorics are high.
There are blind bhakts. Who were reasoning till few months ago why Rs 500 and Rs 1000 notes must be scrapped and we must have only Rs 100 notes to prevent black money. Now giving reasons why Rs 2000 note is a masterstroke. Were explaining few days ago, why tracking device has been put on notes. Now explaining why not putting them is a masterstroke. I understand their sentiments in a country that has seen so much of loot in last seventy years. I always feel hesitant to shake their faith. It is like faith in prophet and dreams of paradise. It keeps many alive. They will lose their motivation to live if snatched from them.
The parties in opposition are crying foul for all wrong reasons. Kejriwal talks of public inconvenience forgetting that he created a similar mess through his odd-even epiphany.
Mamata made people die in Kolkata through fall of a corrupt bridge. And these are those scavengers whose appeasement of terror has led to terror crisis. I refer to their stance on issues like Kashmir, Burhan Wani, Yakub Memon, Kanhaiya Kumar, Babur, Tipu Sultan etc etc.
The incumbent government is showcasing it as a bold attack on black money. But neither there is anything bold about it. Nor it impacts black money generation in any significant way. Nor black money is a big issue that we are made to believe in.
There is already a lot of taxation in system. And even without paying taxes, most of this so-called black-money of common man has fulfilled its economic value – by feeding poor, getting juice for patients, paying auto fare of job aspirant etc etc.
The only legitimate reason for demonetization is to stop terror-financing. And hence it was necessary. But that does not seem to be priority or focus. And hence through faulty execution, we just tortured the common citizen – the poor, the nursing mothers, the senior citizens, the patients in hospital, the babies, the children, the unemployed youth.
Enhance liquidity rapidly. Catch the big fishes. Start with all those who fund political parties in descending order of their fund contribution. Those who got big government contracts.
Stop praising Sharad Pawar as most upright person. The whole country knows how transparently he controls sugar belt and how much entrepreneurship he displayed for it. The Bhakts were accusing Sharad Pawar as greatest icon of corruption till few months ago. And now their Prophet has greatest praises for him. He travels all the way to attend his function and laud him with eulogies.
We have seen such double standards many times from the current government. Be it on Article 370 in Kashmir, Ram Temple (not theme park), cow-slaughter, Teresa sainthood etc etc.
But this is worst time to display this when rhetorics on uprightness even at cost of life is all time high.
Are you defending black money?
Na re baba. I am not defending black money or offending white money. I am just stating that neither is black money cause of all our miseries nor eradication of black money will make India defeat terrorism. There are multiple evils facing us – black money, pollution, junk food, pornography, alcohol, ecological imbalance, constipation, diabetes, traffic jams, outdated education system, corruption, blah blah. Different experts who have studied each in detail will justify why their problem is most serious. So yes, we must solve all of them. But we must refrain from being paranoid about any of them at expense of lives and livelihood of entire nation.
Further, not all who generate black money are villains. 99% of population generates hardly 1% of black money. The 1% who generate the bulk are hardly affected beyond a short term inconvenience by the demonetization. In fact they are smart enough to use this rare opportunity to generate even more black money by paying people Rs 1000 for getting Rs 4000 of cash by standing in queues of different banks. In most parts of country, majority of queue-makers are these fraudsters. Then many needy people who cannot stand in queue or need liquidity urgently also are forced to pay 25% of cash the queue-makers get for them from banks.
So it is creating further liquidity crisis, making problem worse, impacting real needy ones and hardly impacting the big fishes who must be caught. It is surprising that politicians who deal with Indian minds day in and day out, could not see this blunder. Or perhaps, everyone wanted to please the boss and earn brownies. The boss wanted to generate selfies. And hence solution of yesterday becomes problem of tomorrow and so on.
So instead of this cello-tape approach to fixing black money or whatever, we must go for more sustainable measures. For example, explore options of a truly paperless economy, if feasible. Provide incentives to declare cash instead of wasting public talent in innovating ways to beat the system. There is lot that can be done. And if that is not feasible, risking even a single life through chaos is definitely not an option.
Further benefits from such chaotic systems with long network effects are questionable. Demonetization is not as simplistic as it sounds. A thorough study may reveal that harms outweigh benefits due to chaos and linkages with other systems. It is a matter of careful planning and meticulous execution – like brain surgery – and not sudden epiphanies of youthful exuberance at stroke of midnight. We need to refrain from this Kejriwal brand of impulsive execution.
The real issues
The MFN status of Pakistan is still not withdrawn. One surgical strike actually makes things worse. Little rain causes mud. When is the next one? When is our POW who got captured just before surgical strike being brought back.
Indus Waters Treaty needs to be seriously reconsidered. Why no update after one meeting?
Terror Analytics system needs to be put in place. Terror finance tracking system is very rudimentary. Needs to be upgraded. Time to clean up Kashmir of India haters.
India demands UN to declare Pakistan as terrorist state. What is India waiting for to take this initiative from its side?
When is the tracking of all anti-India sloganeers in JNU to be completed? Videos are available.
What next on NDTV ban? We almost forget that. How can government explain first putting ban -only for a day – and then withdrawing?
Remove Black Money, Remove junk food, Remove constipation. But not at expense of the most vulnerable family member among us.
The times are tough. Terror is worse than ever. Lives are at risk. This is the number one problem facing India since last 1300 years. And cause of all other problems. We can no longer afford to deny it anymore because the scale and impacts are at a level where our existence is at stake.
The current ostrich mentality and docile mindset will not help it. Even a country like US found need to elect someone like Donald Trump. Our situation is much more grave.
Let us focus on that. Let us focus on real wealth creation. Let us break bones of terrorists. Let us bleed those who plan to bleed India. No person is above Bharat Mata. No party is above Bharat Mata. With masterstrokes or without, Bharat Mata has to win.
Our priorities must be crystal clear.