Demonetisation : A Misguided Missile fired in Haste

CMA Rakesh Bhalla

DEMONETISATION : A Misguided Missile fired in Haste – But we should support smooth implementation in Larger interest of “ Great India”

I appreciate the intention of the Government for demonetisation of the currency as it might have taken in good spirit for betterment of people as well as our nation.

However, following questions/issues which are being circulated through media / social media still remained unanswered which is raising doubts in the minds of common man and need to be clarified :

1) Secrecy of the whole operation

Honb’le Prime Minister & Finance Minister repeatedly & strongly stated that this development was kept as top secret which was known to few people only before 08th evening. At this level, this statement is very significant & we believe that it is true but the following evidences are creating doubts regarding the authenticity of their statement:

– How news dated 27th October 2016 appeared in Dainik Jagran, one of daily newspapers that Rs. 500 to Rs. 1000 notes are going to be withdrawn & now Rs. 2000 note will come ? (Source: Dainik Jagran dated 27th October 2016).

– How & Why in one of the state units of BJP, deposit of Rs. 3 crores in bank accounts was made immediately before announcement of demonetisation on 08th November ? (Source – The Tribune dated 11th Nov. 2016 & The Times News Network dated 12th Nov 2016). Out of Rs. 3 crores, Rs. 60 lakhs deposited hours before & Rs. 40 lakhs were deposited minutes before the announcement of demonetization scheme by the PM at around 8 pm. This does not seems normal deposit. Information is available for one account only but there are lakhs of accounts of various units of BJP and other political parties where majority of so called black money could have been deposited.

How the deposit was made by BJP unit even after the normal business working hours of the banks & just before the announcement?

– Recent RBI reports stated that  the percentage of deposits in various banks such as SBI, PNB, UBI and Bank of Baroda, has considerably  increased in July-September Q2 compared to the previous quarters. Opposition parties claimed that Rs. 5 lac crores have been additionally deposited which is one third of total currency of Rs. 500/1000 notes, in response to such increase in deposits, FM made an unimpressive statement that the increase in deposits was primarily on account of payout of arrears of 7th Pay Commission (arrears were only Rs. 34 thousand crores against deposits of Rs. 5 lac crores) – ( Source India.com & various news items)

2) Writing off of multi-crores corporate loans by banks

As per the media reports, one of the major banks has written off multi crores loans of various corporate houses including Vijaya Mallaya Group. There may be more banks who have done it in the name of NPA.

Was there any nexus between write off of multi crore loans with this Note Bandhi decision?

3) Appointment of Mr Urjit Patel and removal of Mr. Raghuram Rajan as Governor of RBI

–  As per tele-broadcast dated 13th November 2016, Honb’le Prime Minister has stated that this preparation was started 10 months back & Government also asserted that printing preparation was started six months back (Time of India 9th Nov 2016). It seems right also as such huge currency printing cannot be done in one & half month time.

–  But question arises : –

• Since this is reported that Raghuram rajan opposed the decision, whether preparation & printing has been started without the consent of Mr. Raghuram Rajan-How it is possible? Has PM/FM directly taken the decision without consent of Governor of RBI?
• If printing started more than one & half months back with the signatures of Mr. Urjit Patel, then

a) Was appointment of Mr. Urjit Patel (who happens to be associated with Reliance Group owned by Ambanis) and removal of Mr. Raghuram Rajan already pre determined?

b) Whether there was any nexus between removal of Mr. Raghuram Rajan, write off of loans of various banks & decision of demonetization of currency?

c) Whether appointment of Mr. Urjit Patel was strictly on Merit?

After De-Monetization

How Government is ensuring that so called black money which was in circulation has not been converted into fresh currency after using following left out loopholes resulting into irreparable loss : –

A) Government has declared the deposits upto Rs. 2.5 lacs in normal bank accounts & upto Rs. 50000/- in Jandhan accounts without any scrutiny.

There are crores of accounts of various individuals in different banks. These accounts can easily be used for conversion of Black Money into White by allowing free flow of deposits below Rs. 2.5 lacs without scrutiny.

B) Our country has a population of 125 crores & if ID cards of 1% people is used than much more than the whole black money in cash can be converted by this mode only. It is pertinent to mention here that upto first 10 days there was no bar on use of one ID card in ‘n’ number of  Banks / branches.

C) Black money can easily be deposited or used showing it Agriculture & other exempted incomes. What steps Government has taken to block this?

D) There is an increase in purchase of Gold in Tons & other costly items for cash both before & after the decision? How it is ensured that this was not black money?

E) Another method of converting black money is deposits shown by Religious places like Temple, Gurudwara etc. What action has been taken by the Government to ensure the genuineness of the transaction?

F) Since accounts of political parties do not come under RTI or Income Tax, they don’t have to disclose the reasons of such deposits. The whole money in cash can be deposited in these types of accounts. What action has been taken by the Government to ensure the genuineness of the transaction?

G) Other means which are being used for converting black money into white is

• Conversion of old currency into new one by commission agents at 20-40% conversion charges (Refer-Media sting operation).
• Property being purchased & sold against old currency (Refer-Media Sting operation).
• Even after 8th Nov Govt allowed to use old money for various payments including Govt Payments / Taxes / Payment of Bank loans & some others . How Govt ensured that use of old currency notes at these places is not use of Black money .

Fake Currency :

No doubt there are fake currency notes in circulation . But fake currency which is in circulation is which is being received  by common man in good faith. So they will suffer not those who are actually culprits for printing & circulation. Other type of fake currency is, which is not in circulation will be dead money for them but this cost them just printing cost nothing else. Moreover how Govt will ensure that New Currency Notes specifically Rs 2000 notes will not be printed by Fake currency dealers . We should understand this is not Rocket Technology . If they can print old currency what is special in new currency ?

Even new currency notes of Rs. 2000 (though not fake ) were found with the terrorists killed recently during encounter.

Future stoppage not ensured

It is pertinent to mention that if generation of Black Money is not stopped than this demonetization exercise by the Government will not be fruitful & may result into another Big Scam.

– No effect on big fishes &  they may escape unhurt.

– Harassment to common man

• Farmers affected – selling of perishable produce at throw away prices, loan at higher rates from commission agents (arhtiyas) for seeds, suicide cases by farmers may increase

As ours is an agriculture dominated economy, the above factors may disturb the whole economic development of our nation.

• Small businessmen / Daily wager dealing on cash already been affected.
• General public will be affected.
• Negative effect may be on Job Market .
• Recession in General & in particular in property market – On one hand we can say that cheaper property will be available and on the other hand, genuine investment in property will diminish & General recession is not good for any economy.
• As per Opposition parties, more than 50 person have died which can be considered as after effects of demonetization operation. If it is true then who is responsible for all this?

Benefit – Liquidity may improve but may have negative effect on Retired Class Individuals

Although liquidity position of the Banks will  improve and Interest rates may come down and may be beneficial to big businessmen & corporates but at the same type decrease in rates of fixed deposits will have negative effect on Retired Class whose main income is interest.

Whether this loss has been intended by the Government at the cost of small gain from demonetization?

Moreover as per recent estimate only 6% of the black money is kept in the form of cash and therefore much more can be converted & the said objective of the Government may not be achieved.

Earlier also demonetization was implemented in nine countries & failed to achieve the desired objectives of curbing the black money in majority of cases.

Though this move is not less than “ Misguided Missile fired in Haste” just to have political gain specifically in forthcoming state election but I think we should support in the smooth implementation of the move considering bigger interest of “Great India” as decision has already been taken by Government elected by us only & roll back now will be another  disaster.

Jai Hind