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Notebandhi is nasbandi of fastest growing economy in world, will not produce any long-term benefits

By Kiran Pandit*
If the objective of the government was to fight corruption then very clearly notebandhi (demonetization) will not hurt corruption. How do pink coloured notes prevent babus and politicians from not accepting bribes?
Black money that is in our system is not corruption. Demonetization may reduce black money, there maybe more money coming into the banks and people will resort to cashless transactions. That's fine. But how does this make the corrupt honest?
Basically demonetization is barking up the wrong tree.
It has helped only:
  1. Removal of fake currency ( microscopic amount)
  2. Put the political parties in a fix before major elections.
Already, its business as usual who are with the income tax officers (ITOs). Almost all chartered accountants (CAs) of Delhi have sorted out their clients black cash and are neat and clean to file the returns.
It’s business as usual in Land and Development Office (L&DO), Delhi Development Authority (DDA) and municipalities. Although property market is in miserable state, the bureaucracy is up to the same mischief. In small towns domicile certificates are still being given after a bribe (now in new currency). Without the bribe the babu will use his discretionary powers to delay giving it up to the last date for admission to tertiary institutes/colleges in the district headquarters.
The satta bazaar is as good as it was before 8th November.
The bootlegging is as usual. Liquor licences are sold to the highest bribe giver.
Police thanas are auctioned. The highest bidder is made the Thanedar/SHO.
Management of currency flow has been very badly handled. Lack of planning and poor implementation is clearly visible in the urban areas. What is happening in rural areas where there are hardly any bank branches? No one in the media cares to find out.
The repercussions of demonetization will be clearly seen in:
  1. No interest in investing in India by outsiders. NRIs are all waiting and watching. Foreign corporates are also backing off. 'Make in India' worst hit.
  2. Fall in foreign tourism. Hotels and tour operators are suffering as domestic tourism is badly hit. Atithi tum bhago! Indians loaded with black money used their money to make a foreign jaunt. Out bound tourism boomed. New Zealand is flooded with Indian tourists!
  3. Foreign exchange dealers stopped trading in Indian rupee.
  4. There is a very big rise in unemployment in unorganized sectors. Building and construction workers are the worst hit. Contract labour on daily wages is totally smashed. Government may claim success by talking of fall in property prices but the reality is that there are no buyers. The objective of generating 10 million jobs for 10 years is badly hit. In fact there will be at least a loss of 1 million/year jobs alone in housing sector for another year or two.
  5. All these raids by Enforcement Directorate (ED) and Income Tax (IT) are creating fears and drop in business confidence. What is being unearthed is just the tip of the iceberg and is serving only as propaganda. Indian business houses are dormant. No big ventures are being planned.
  6. Demonetization followed by raids has further empowered the bureaucracy and public sector bank management to make money.
  7. There are no major incentives to those who pay taxes properly. No tax benefits have been given to salaried classes. No benefit has been given to employers who properly employ workers with proper wage structure, provident fund deductions and ESI insurance provisions.
Was going towards cashless economy the main aim? What’s the point in bragging about sabjiwalas managing without cash? Cashless economy doesn't mean corruption free governance.
Demonetization hasn't been very successful anywhere in the world in the past. Demonetization in itself can't produce the desired results. It has to be a part of a complete package of well thought out and well timed economic and fiscal steps.
To me it’s a drive. Drives do not produce long term benefits. Just like Indira Gandhi's nasbandhi (sterilization) didn't make any impact on the population growth, this notebandhi is a nasbandi of the fastest growing economy in the world.
---
*Director (company) at Pandit Properties Investment Ltd. Lives in Auckland, New Zealand. For source click HERE

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