Demonetisation or Hara Kiri
By Prem Prakash
New Delhi [India], Dec.12 (ANI): It all started on the night of November 8th. Billed as the biggest attack on corruption and ill gotten money, demonetisation was hailed as one such action which no one had dared to take since India's independence in 1947.
We conveniently forget that corruption was not an issue during India's struggle for independence. It is a disease that hit India and her economy post-independence with the adoption of Fabian Socialism, which advanced principles of democratic socialism via a gradualist and reformist effort, rather than by means of a revolutionary overthrow.
There are no two opinions on India's economy and growth being severely sapped by corruption. Corruption has perpetuated poverty. The rich and the powerful aided and abetted by politicians and bureaucrats, cornered India's natural resources. The license permit raj and other regulatory measures ensured that young entrepreneurs or start ups have no chance against established huge cartels.
The Communist-style economy ushered in with socialist patterns, the nationalisation of banks and the prevalence of a license permit raj, etc. ensured that a corrupt bureaucracy took control of the government's revenue departments and the country's banking system.
It was only when the nation was almost going bankrupt, and had to mortgage a part of its gold reserves abroad (With India's foreign exchange reserves at USD1.2 billion in January 1991 and depleted by half by June, barely enough to last for roughly three weeks of essential imports, the nation was only weeks way from defaulting on its external balance of payment obligations), the nation woke up to the reality of what had been done.
Terrified politicians ushered in the so-called economic liberalisation in the 90s under the World Bank's diktat that not going ahead with reforms, would halt further loan support for India.
Liberalisation was introduced, but no effort was made to dismantle the Communist-style economic structure.
It must be acknowledged that key revenue departments of the government, including income tax, customs and excise and bank managements, are riddled with corruption.
Most nationalised banks are close to being broke under the pressure of bad and dubious irrecoverable loans that they extended to Indian industrialists. Why? Surely under some consideration, or else, why were the loan documents weak, making it almost impossible to recover the money. Politicians too have played a major role in facilitating all of these murky dealings.
India has a leader in Prime Minister Modi who dares to go where no one else would dream to.
The demonetisation of high value currency notes is a major attack on India's cash economy, which feeds the evasion of taxes. Confident of the popular support, only Prime Minister Modi could have taken such a step.
This move, aimed at ferreting out hoarded cash or invested black money, could also lead to clues as to where the money is stashed abroad. It is a bold move by a popular leader. But who were tasked with the responsibility to implement this great action? None other than the same banks, the same revenue departments that have helped create the black economy.
Let us not forget that the biggest chunk of black money today lies with politicians and their parties, with corrupt bureaucrats and bankers, and their allies.
The Prime Minister and his government expect bankers, bureaucrats and revenue department officials to implement this scheme! This expectation has turned out to be ill-founded. The bureaucracy has failed to foresee the fallout of demonetisation and its implementation, causing a huge inconvenience to the people.
Where do we stand today, a month after demonetisation was announced? A huge amount of "black money" has been converted into white, aided and abetted by the corrupt among the bankers. How else do you explain the seizure of huge sums of new currency notes running into not just tens, but hundreds of crores? This seizure of new currency notes proves that these came out of the banks. How?
Gold and jewellery sales sky rocketed on the night of November 8 and even for several days following that. Where were the great income tax and enforcement department officers? They allowed all sales to take place right under their noses, and now, are making a great show of raids and seizures. Why did they fail to move in when the kill was taking place?
Has this bold step of the Prime Minister turned into a kind of "Hara Kiri" (Japanese definition for ritual suicide by disembowelment), for his government? The people of India are braving the inconvenience; businesses have suffered; the hospitality industry is in shambles and tourists are unable to exchange foreign currency. The result — smaller shop keepers, taxi drivers and auto-rickshaw drivers have now got used to accepting dollars or any other type of foreign currency. Surely, this is undesirable.
The man in the street is backing demonetisation completely, ready to stand in long queues, not knowing that some bankers have been siphoning off money from the proverbial back door or in the dark of the night.
Has all this harassment caused to the people of India by an inefficient bureaucracy failed to fight the scourge of black economy? A big YES is the answer.
The government bureaucracy has miserably failed to foresee the impact demonetisation would have on daily retail trade, wholesale markets, daily wage earners, and the agriculture and tourism sectors.
It has failed the Prime Minister .It is the bureaucracy's responsibility to implement government policy, and this regard, officers of the finance ministry and related departments, besides the Reserve Bank of India (RBI), have failed the government.
Where do we go from here? The government may have to consider course correction on demonetisation to neutralise or tone down the huge damage done by poor bureaucratic implementation.
The government must ensure revenue and enforcement officials do not harass the people from January 1. If India's bureaucracy is waiting for January 1 to start their ugly work, this should not be allowed.
The government needs to come out with a budget on February 1 that provides great relief to the people and kick starts a grounded economy suffering currently from faulty implementation.
It must prove wrong the belief that India's economy would be in downturn for the next two quarters, or else, let it be understood that demonetisation may well turn into a "hara kiri" – suicide by a government that has been doing well.
Mr. Prem Prakash is an eminent journalist and Chairman of ANI Media (P) Ltd. (ANI)