Demonetisation—More questions for the PM

Less than a week after the Prime Minister rolled out his ‘surgical strike’ (described as ‘farji-cal’ by Rashtriya Janata Dal leader Lalu Prasad Yadav) on behalf of cashless economy, even more disturbing questions are cropping up to cloud the decision.

While Indian jugaad threatens to derail what is publicly designed as a war on black money, there are signs that the Government itself is helping the hoarders of black money to get away lightly.

What, for instance, explains the alacrity with which the Government announced last week that ‘temple hundis’ would be accepted by banks with no questions asked? What it means is that anonymous donations made to temples—possibly by extension to mosques and churches as well—would be allowed to be exchanged for new currency without any ceiling.

This announcement, some economists apprehend, may open the floodgates for hoarders of black money to make them white. Temples can simply claim to have received anonymous donations over the past several weeks, deposit them in their bank accounts, pay tax wherever applicable and later discreetly return the bulk of the money to the donors after retaining a certain amount for the service. A win-win situation for both temples and the hoarders.

Similarly, there are reports that dormant ‘Jan-Dhan’ bank accounts with zero balance have suddenly started receiving deposits of Rupees 50,000 to a lakh of Rupees in each of them. With millions of such accounts opened for the Government’s flagship programme to enable the poor to receive cash benefits, the move to scrap Rs 500 and Rs 1,000 currency notes has come as a windfall. Clearly the hoarders of black money are using their domestic help and others to deposit their unaccounted money in these accounts, which will possibly be withdrawn at a later date and 80-90 per cent of it returned to them. Once again a win-win situation for both.

There are also reports that medical and engineering colleges which accept hefty capitation fees for admissions have been paying employees their salary for several months in advance so that each one of them may deposit Rs 2.5 lakh in their bank accounts without any fear of having to pay either tax or penalty.

Yet another loophole in the law is expected to let political parties get away with their black money. The law permits political parties to accept anonymous donations below Rs 20,000 with no obligation to disclose the identity of the donor. Therefore the BJP national president Amit Shah’s public exultation that in Uttar Pradesh, Samajwadi Party and the BSP were facing an economic crisis may well be misplaced. If anything, donations to political parties may actually go up.

What is also expected to go up is Agricultural income irrespective of a good monsoon or a bumper crop. With agricultural income not taxed, approximately 18 per cent of income tax payers, according to information given to Parliament, annually claim exemption for their agricultural income. It has been known for long that rich farmers, industrialists with farmhouses and even bureaucrats have been the real beneficiaries of the Government’s reluctance to impose agriculture income tax.

In the meanwhile, questions continue to be raised about the move to withdraw 86% of the currency in circulation till last week. Experts have pointed out that according to a study conducted by the Indian Statistical Institute last year, it was estimated that at any given point of time the volume of counterfeit currency did not exceed Rs 400 crore.

The Government, ironically, is expected to spend Rs 12,000 crore or more to print new currency notes to replace the old.