Let us first get the definition of black money very clear in our minds. The incomes generated through legal or illegal activities which are not declared in order to avoid tax constitute black money. So, black money is merely not hoards of notes of ₹1000 and ₹500 , but is the undeclared income.
Gone are the days when people used to stack black money only in cash. It is alleged that black money is present in undisclosed accounts in Swiss banks and offshore financial centres. Post demonetisation, I wonder what might have happened to the 500 citizens who were listed on Panama Papers. Amitabh Bachchan, Aishwarya Rai Bachchan, Ajay Devgan, Vinod Adani, to name a few. Moreover, according to reports, people who have black money in cash are making those employed under them deposit it in their Jan Dhan accounts.
Section 26 (2) of the RBI Act, 1934, says “On recommendation of the Central Board the 2[Central Government] may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender.” The first demonetisation took place in 1956 when the then government scrapped all ₹500, ₹1000 and ₹10000 notes minted before January 13, 1946. Demonetisation again took place 1978, but a very small fraction of citizens were affected as bank notes that were frozen only constituted about 2% of the circulated currency value. But in 2016, denominations of ₹500 and ₹1000 constituted 86% of the money in circulation, which is why demonetisation has become the mother of all pains.
Inflation is likely to fall because of sudden disruption of selling and purchasing power. But the country’s service sector, which constitutes almost 60% of GDP has been hard hit due to the sudden contraction. Mainly due to losses in trade, hotel, transport, etc. According to CARE ratings, demonetisation will lower GDP growth by 0.3-0.5%.
“Enemies from across the border run their operations using fake currency notes,” Modi said on November 8. “This has been going on for years. Many times, those using fake ₹500 and ₹1000 notes have been caught and many such notes have been seized.” There is no denying that counterfeiting will go down. But for how long? Counterfeiters are always one-step ahead in their ability to reproduce banknotes. How many times will the government respond to the problem with an extreme step like demonetisation?
Farmers are having a tough time in selling their Kharif harvest due to a shortage of cash. With no choice left, some are forced to sell their crops at lower prices. With less cash in hand, there is going to be a delay in the sowing of Rabi crops. People are unable to pay the daily wages of workers. Millions of cash-dependent petty roadside traders, street vendors, grocery store owners have been hit hard with a sudden dip in their business. Then there are places like one Sunderbans island where there are no banks or ATMs. For an affluent individual, it is very easy to state that demonetisation is a temporary issue. Yet, for some, it has the potential to leave a lifetime scar. Last, but certainly not the least, the rising death toll has already reached 55, according to this report on The Huffington Post last updated on November 18.
Let’s consider the black money problem as a tree and the money as its leaves. Cutting down the leaves alone will not scrape the problem out of the society. It will not stop the flow of black money. The leaves grow back with time. Black money transactions in the real estate and bribery, in general, will persist.
I do not deny that the opposition is busy playing foul politics. But yes, I do not support demonetisation and don’t you dare call me ‘anti-national’. Period.