A bitter pill for promising future

Thiruvananthpuram: The cash ban announced by Prime Minister Narendra Modi on Tuesday is not as much a blow to unaccounted money, nicknamed black money, as to fake notes, a large portion of which funds terror.

Bankers and Intelligence sources say the counterfeit trajectory originates in Pakistan and Bangladesh, coursing through West Bengal and the Gulf States to reach different parts of the country, including Kerala.    

The Government is awaiting the closure of the 40-day window period to estimate what is left of the Rs 15 lakh crore worth high denomination currencies in circulation in the country. The total amount of high denomination notes reaching banks and post offices during the window period can be subtracted from Rs 15 lakh crore to determine the quantum of fake currencies, said a top banker.    

The M. B. Shah-headed Special Investigative Team has estimated that the shadow economy is 20 percent, a major portion of which is unaccounted for.  The current move is a corollary of NDA’s electoral promise to bring home all unaccounted money stashed abroad.

The move follows the Income Declaration Scheme 2016, by which the Centre mopped up more than Rs 65000 crore. People were cajoled to declare undisclosed cash and assets under the scheme and buy peace or else face the strong arm of the state. This needed to be translated into action.

But demonetization has had an adverse impact on transactions of the common citizen, choking his liquidity for a few days and making it difficult to meet abnormal contingency expenses. This equally applies to small traders and agricultural markets. But many bear it as they think that real estate prices would come down with black money coming out in the open.

For businessmen, it would not be much of a headache as they would have to bring the cash into the books, deposit it in the banks and pay tax to the Government. But this will be additional revenue for the Centre and States.

Last night, in some towns, jewellery shops functioned till midnight. Those who held unaccounted cash but did not declare it converted the high denomination cash into gold coins. For jewellers, it was extra accounted trade and for the Government more taxes.

Individuals resort to circuitous laundering of their ill-gotten wealth. They pass on unaccounted cash to private businesses, who in turn show it in their books, pay 30 percent tax and share the balance 70 percent with the shady donor, said an IT expert.

What is commonly called black money is not a stock. It is a flow. One-time measure is a message but not a permanent deterrent. There is wild guess on our estimate of parallel economy. Officially, the tip of the ice berg is Rs 115 lakh crore this financial year (Rs 65,000 IDS declaration + Rs 56,000 crore detection by the Income Tax Department). It will be manifold higher.

The hardship of the common man cannot be brushed aside since the withdrawal limit of Rs 4,000 is too low. It would have been better at Rs 20,000, the accepted permissible limit for a cash transaction.