Skip to main content

Chidambaram: new series notes to cost Rs 20,000 crore; top economist: does govt know what's black money?

By Our Representative
In a strong reaction to Prime Minister Narendra Modi announcing that the denomination of Rs 500 and Rs 1000 would no longer be legal tender, former finance minister P Chidambaram has said that the introduction of “new series of notes” of Rs 500 and Rs 2,000 denomination is estimated to cost Rs 15,000-20,000 crore", wondering if the economic gains of demonetization would be "at least equal to that amount.”
Pointing out that demonetizing of the two denominations is no guarantee that black money would be unearthed, Chidambaram says, “In 1978, the Janata government demonetized high denomination notes”, yet that action “failed to achieve its objectives”, and “high denomination notes were re-introduced shortly afterwards and the volume of unaccounted wealth and income admittedly increased.”
Suggesting that things are far more complicated than in 1978, Chidambaram says, “Rs 500 and Rs 1000 notes in circulation, by value, account for 86.4 per cent of all the notes in circulation”, adding, forty years ago, “a Rs 500 note was a high denomination note. Today, it is doubtful. One has to take into account the inflation in the intervening period.”
Wonders Chidambaram, whether with the demonetization the present cash to GDP ratio, which is 12 per cent, will it come down to the world average of about 4 per cent, asking, “Will gold imports surge indicating that unaccounted income/wealth may seek refuge in bullion and gold jewellery? ”
Chidambaram's commentary comes amidst a senior economist, Prof Prabhat Patnaik, doubting whether the Government of India understands what black money means. Patnaik says, the implicit understanding that “black money” consists of hoards of cash which are held in trunks or pillowcases or buried under the earth is totally wrong.
“With this understanding, it is then suggested that if Rs 500 and 1000 notes are demonetized, then people going to banks to exchange large amounts of old notes for the new legal tender would make the banks suspicious; and banks in turn would convey their suspicions to the tax authorities who would then catch the culprits”, Patnaik says.
What is not understood, says Patnaik, is that “black activities”, like “white activities”, are meant to “earn profits for those engaged in them; and simply keeping a hoard of money earns no profits.” He adds, “Profits are earned not by hoarding money but by throwing it into circulation; the 'miser' does the former, the capitalist the latter. Those engaged in black activities are capitalists not misers.”
Giving example of what black money is, Patnaik says, “If 100 tonnes of minerals are extracted but only 80 tonnes are declared to be extracted, in order to reduce tax payment, then we have a case of 'black money' being generated. Likewise, if $100 of exports are undertaken but only $80 are declared, and the remainder $20 are kept abroad in Swiss Banks, which is against the law, then we have a case of 'black money' being generated.”
In a separate commentary, Prof Kamal Mitra Chenoy, professor of political science, has said that Modi government's tactic of replacing Rs 500 and Rs 1000 notes is not “an economic but political move”, adding, “As the Panama Papers have shown, all major industrialists in many countries have used Panama as a tax haven”, whether it is the President of Iceland, who had to resign because of investments abroad, or Pakistan PM Nawaz Sharif's three sons, President Vladimir Putin's friend and famous cellist, or actor Amitabh Bachchan.
“The truth is that more than 90% of black money from India is in tax havens or banks abroad. Why isn't the Finance Ministry taking interest in getting black money into India where it can be used for public investment?” he asks, adding, “Ram Jethmalani claimed last year that the Germans were willing to repatriate black money, but the Modi government refused to write officially to the German government.”

Comments

Unknown said…
What you had done during your tenure Mr.Chidabaram you and your son are corrupt
Sanjeev Thakkar said…
People last in the back money chain are left with holding the real currency. The beneficiary on top have long before converted into something more substantial as investments into stock, real estate, bullion etc...there will be small and mid level unaccounted mobey that will surface up...big will become bigger within months

TRENDING

'Modi govt's assault on dissent': Foreign funds of top finance NGO blocked

By Rajiv Shah  In a surprise move, the Ministry of Home Affairs, Government of India, has cancelled the foreign funding license of the well-known advocacy group, Centre for Financial Accountability (CFA), known for critically examining India's finance and banking sectors from human rights and environmental angle.

Misleading ads 'manipulate, seduce, lure' to market unhealthy harmful food

By Our Representative  The Nutrition Advocacy in Public Interest (NAPI) in its new report “50 Shades of Food Advertising” has sought to expose how seductive, luring, manipulative or deceptive these advertisements can be. Consequences of such advertising are increased intake of unhealthy food products that is associated with obesity and diabetes, it says. 

A Hindu alternative to Valentine's Day? 'Shiv-Parvati was first love marriage in Universe'

By Rajiv Shah*   The other day, I was searching on Google a quote on Maha Shivratri which I wanted to send to someone, a confirmed Shiv Bhakt, quite close to me -- with an underlying message to act positively instead of being negative. On top of the search, I chanced upon an article in, imagine!, a Nashik Corporation site which offered me something very unusual. 

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

'Wedding of the century': What does Mukesh Ambani want to prove by such extravaganza?

By NS Venkataraman*  Mukesh  Ambani,   a renowned Indian industrialist who is said to be the richest person in India and  one of the richest persons in the world,   has just now conducted the wedding celebration of  his son in Mumbai,   with unheard level of lavishness in India.

'Failure of governance': India, China account for 54% pollution-related deaths globally

By Vikas Parsaram Meshram*   A recent report jointly prepared by UNICEF and the independent research organization Health Effects Institute has been released, and the statistics within it are alarming. It states that in 2021, air pollution caused the deaths of 2.1 million Indians, including 169,000 children who hadn't yet fully experienced life. These figures are indeed distressing and raise questions about why there hasn't been more serious effort in this direction, putting policymakers to shame. 

'28% rise in sedition cases': Top global NGO alliance rates India's civil space 'repressed'

By Rajiv Shah Rating India's civic space as repressed , Civicus, a global civil society alliance, in its new report submitted to the UN Human Rights Committee (UNHRC) on the state of civic space in the country has said that the use of sedition law against the Modi government’s critics continues. "Under the government of Prime Minister Narendra Modi, sedition cases have increased by 28 per cent with over 500 cases against more than 7,000 people", it says.

How US is using Tibetans to provoke conflict with China 'ignoring' India

By Lobsang Tenzin*  On July 12, US President Joe Biden signed the Resolve Tibet Act, and Tibetans cheered for it, believing that the law promotes a resolution of the dispute between Tibet and China. Is this true? First, let's look at the issue of the ownership of Tibet. 

Over 3.8 billion animals at risk: India on crossroad in animal welfare practices

By Rupali Soni*  In a collaborative effort, the India Animal Fund and Dasra have unveiled their report , "Our Shared Future | Securing Animal Welfare, Human Wellbeing, and Sustainability in India." This landscape report provides a thorough overview of animal welfare and underscores its indispensable role within India's socio-economic and ecological frameworks. It also illustrates how animal welfare is intricately intertwined with public health, labor welfare, and climate resilience.