Dear Friends, Fellow Citizens,
We are living in the midst of a cataclysm. PM Modi, swearing that he is going after black money ignoring the risk to his life, has demonetized 500 and 1000 notes overnight. We are spending days and days in queues while being reassured that this is helping to bring back black money to India, that we are fighting anti national elements…. Here are some issues to consider.
- What about the massive NPAs(Non Performing Assets) of banks? Leave alone no action against those guilty, these accounts are being written off. The Supreme Court has re opined that the names of these defaulters need not even be made public. Three days ago SBI wrote off loans of 63 Industrialists worth 7 thousand crores.
- Only 5-6% of total black money is in the form of cash. Everyone is aware that big hoardings are in the form of gold, speculation, real estate, fake companies, is stashed in foreign banks, in companies in Panama, Mauritius etc. The current move can at the most target small tax evaders; pursuit of these ‘hoarders’ is going to net only about 5% in all.
- If all black money is stored only in notes of Rs. 500 or Rs.1000 then it means than it will amount to only 3% of the estimated black money.
- It should be noted that though the number of the small evaders of tax is very much larger, it is the big ones who have inconceivably bigger money.62 people own about half the total wealth in the world; 1%people own 53% of the total wealth of India.
- Similar measures were adopted and for the same declared end in 1978 and earlier in 1946. In 1978, 10,000, 5000 and 1000 rupee notes were banned. But at that time these notes were not used by common people. Anyway, at the end it was clear that the purpose stated was not achieved. Only 3% of the currency notes were in big denomination. Today a daily wage worker gets nearly 500 rupees a day. 86% of the total currency of India is in 500 and 1000 notes and this has been knocked off overnight, without the Govt. putting alternative currency in place.
- The government is saying that peasants who have bank loans can withdraw higher amounts every week. But as per an NSSO survey, maximum sections of peasantry take loans from local money lenders or cooperatives. The Rabi crop is due for sowing imminently. Cash crunch in this period has serious implications for crop production and food security of the country. Reverses in agriculture even in good monsoon years abet land acquisition for corporate in the long-term. Imperialists are happy as dependence on import for food will increase.
- Modi Govt. has been continually raising the ceiling on money that can be sent abroad. It has now been increased from 75,000 dollars (in May 2014) to 250 thousand US dollars.
- In 2011, a list of 658 Indians with accounts in Swiss banks was sent to Swiss banks. Neither Congress led UPA govt nor Modi govt has (nearly half the term is over) bothered to take any action on this.
- There are already ‘black operators’ in the market who are exchanging the money and transferring small bits to different accounts in lieu of commissions.
- Actual target should be black economy rather than the term ‘black’ money implying money supposedly hidden away in mattresses, false ceilings, etc.We are not living in the movies. Blocked money is useless. It is always invested and partially not declared. Only small businessmen, petty greedy or really needy will hoard money as cash.
- Women put away money in small amounts to use for children in families with drunken husbands, tie away a note or two for a rainy day or a child’s marriage.500 is not big cash now a days. Now all such savings are rendered useless and must be exchanged for new notes, i.e. ‘declared’ within the family.
- Companies supplying the silver ribbing and the paper for the new notes are the same for both India and Pakistan. So, what use is the argument that the step will hit the counterfeit notes being circulated by Pakistan and if we are exhausted standing in lines, we should grin and bear it because it is all for the country?
- This step will facilitate eventual FDI in retail, a step long contested by Indian people. The small neighbour hood shopkeepers are virtually at a standstill. A big section of the middle class is shifting to online shopping.
- Banks are accepting more money (up to Rs. 2.5 Lakhs unquestioned and much more in current accounts) but giving much less in cash. What happens to our money in banks? Where does it get invested, to whom is it lent?
- It is estimated that printing currency to replace the demonetized notes will take at least three months if presses printing these work three shifts continuously. So the inconvenience is not likely to be over soon. Money can be given to the bank but cash crunch shall remain with common people.
- This step is mobilizing cash for the banks, which were facing massive deficits due to NPAs. The Budget speech of 2016 estimated that recapitalization of banks needed 9 lakh crore rupees and also a small grant was made to that end. 10 lakh crores is the estimated collection through this drive.
- It will help plastic money companies and e-payment companies to flourish.
- For common people it means
- Standing days and days in long queues to withdraw or exchange their own hard earned money.
- Leaving jobs, daily wagers are worst affected. Anyway, jobs have been an immediate casualty. Daily wage workers are employed. There are no takers at labour chowks. Machines lie silent in factories, raw produce is rotting in mandis, retrenchments are on in the textile sector (Tamil Nadu especially).
- No business for traders as they do not have enough cash to restock and also number of customers has dropped.
- People are cutting down on consumption as they do not have money. Perishable items like vegetables will rot in the market. It will have immediate impact on peasantry. The price of flour has already soared.
- Transportation is worst affected with no money for toll and to pay the dhabas for food en route. So drivers are not moving. It will in turn affect both business and price rise.
- No money for medicines and hospitals. Even if they are instructed to accept old notes, no change is available.
- People are dying, falling sick in queues. Already the toll is 50 deaths directly attributable.
- ATMs un (under) prepared to handle all this.
People’s demand has been that black money be ‘brought back’ i.e. the money stashed away in different forms abroad and ill gotten through activities involving the sale of the country’s assets with attendant commissions and bribes. These big fish are the facilitators in defence deals, politicians and the big capitalists or corporate etc. The current demonetization does not affect their wealth in the least. Let us see the facts and let us demand accountability and answerability from our rulers. Modi promised to put 15 lakhs in every citizen’s account from black money thus recovered. He has finished half his term.
Friends, just because there is a flamboyant action, with high publicity moralizing and nationalism evoked, and all our suffering supposedly for the good of the country, it is not necessarily what it is stated to be. We must study whether the action is actually relevant to the stated cause. What the move will result in is only to enlarge the tax net of India, bringing in small shopkeepers, peasantry. This too in a country where this section does not have the sort of earning which, if subjected to the high tax rates of India, could allow it to send children to private schools, access private health care etc. Anyway, this same end of widening the tax net in small fish could also have been achieved by adequate alternative currency being put in place. But this is politics for effect- perception politics. ‘Something’ must appear to be done. A logic has been let loose that the more uselessly painful such a step is for the common people the more effective it must be for the country. There was common knowledge that public sector banks were in crisis situation due to NPAs. These deficits were to the tune of 9 lakh crores. In his Budget speech, Finance Minister Jaitley spoke about the need for recapitalization and sanctioned some money for the same. Now the notes being brought in by demonetization will achieve the same end, decrease the constraints on the RBI as a lot of money will be thrown out of the system and banks will be able to lend again to those big capitalists who are responsible for the NPAs in the first place.
This anti people step must be rolled back immediately. Let us demand accountability and answerability from the Central Govt. Demand that black money stashed abroad should be immediately brought back. Demand that the list of those whose loans are the major NPAs should immediately be made public.
Delhi Committee, CPIML(New Democracy)