TWIN CHALLENGES FACING INDIA
CURRENCY CHAOS HERE IN INDIA, TRUMP THERE IN US
Currency chaos here in India, Trump there in US: The twin challenges facing India
A. A former Governor of the RBI, Raghuram Rajan, had apparently argued against demonetisation precisely because of this ability of Indians to adapt.
B. The question the government needs to answer is: where is the missing black money?
C. Currency chaos here in India, Trump there in US: The twin challenges facing India.
Currency chaos here, Trump there: The twin challenges!
By: KC Singh: The writer is a former Secretary, Ministry of External Affairs
1. Some wait: Black money is still out there, but the cash crunch has hit the poor.
2. AS the 50-day grace period sought by PM Narendra Modi for normalcy to return nears its end, demonetisation woes continue unabated.
3. Incessant tweaking of policy and shortage of notes, particularly of Rs 100/500 denominations, raise concern over the economic impact of a decision based on erroneous assumptions and implemented ham-handedly.
Externally, friends, allies and antagonists of the US are still assessing what disruption President-elect Donald Trump brings to the global order.
4. Despite a fortnight remaining for old notes to be returned, out of the Rs 14.50 lakh crore demonetised currency, Rs 13.12 lakh has already been deposited. The government reportedly expected Rs 3-4 lakh crore — constituting black money — to remain unreturned. An NIPFP official study in 1985, commissioned by the government, estimated black money at 21 per cent of the then GDP.
5. At that rate for today’s GDP it would amount to over Rs 20 lakh crore. The expected taxes in 2014 were Rs 13.64 crore. Any government would surmise that this amount brought into the tax net could bring an economic bonanza, particularly for NPA-stressed banks.
6. The question the government needs to answer is: where is the missing black money?
7. It is estimated that 46 per cent of it is in land and buildings, 26 per cent in gold and jewellery, 24 per cent in foreign holdings and only 4 per cent in cash.
8. The cash component — the life blood of small businesses, rural economy and small household savings of housewives — got normally deposited.
9. It seems actual black money has been recycled by inventive chartered accountants using dormant accounts and hired daily wagers, as indeed greedy bankers and post office bosses.
10. A former Governor of the RBI, Raghuram Rajan, had apparently argued against demonetisation precisely because of this ability of Indians to adapt.
11. On the other hand, the government has seriously miscalculated its ability to remonetise quickly to minimise disruption of the economy and livelihoods.
12. India has a workforce of 450 million, of which only 7 per cent is in the organised sector. Of the remaining 415 million in the unorganised sector, half are in the farm sector and the rest in construction, retail and small-scale manufacturing.
13. Most of them are daily wagers, now badly hit by the cash crunch. The longer it takes for normalcy to return, the worse the disruption and job losses and supply chain dislocation.
14. While the nation was undergoing this purgatory therapy in the name of nationalism, Parliament was stymied by the Opposition insisting on PM Modi’s presence and explanation for his decision.
15. Prime ministers in India in the past and in the UK and Canada, both have the Westminster system, routinely answer questions, certainly on crucial policy shifts.
16. Unfortunately, the frequency of meetings of Indian Parliament annually has fallen from 140 days in the 1950s to an average of 60 days since 2000.
17. The position in the states is even worse.
Extract courtesy by: The Tribune, THE VOICE OF PEOPLE, CHANDIGARH
Edited and forwarded by:
Balbir Singh Sooch-Sikh Vichar Manch
http://www.sikhvicharmanch.com/
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