DEMONETIZATION - HIT BLACK MONEY...!!!
We, the undersigned, support all efforts to stop
corruption, stamp out black money and counterfeit currency, and act against
funding that helps creates unrest in the country be it through terrorism or
creating divisions and hatred among people.
However, the decision to demonetize Rs 500 and Rs
1000 notes is misconceived and will not address the problem of black money for
the following reasons:
If it is the Government’s case that high value
denomination currency is used to hoard black money, then the decision to
reissue new Rs 500 and Rs 1000 notes does not make sense. Issuing even higher
value Rs 2000 note is completely inexplicable and puzzling.
Black money is generated through evasion of taxes
on income from lawful activities and money generated from illegal activities.
In the absence of steps to curb the generation of black money, demonetization
is a futile exercise, as it proved to be in 1978.
In the last 5 years, IT raids have found that only
5-6% of black money is kept in hard cash. Moreover, those who have amassed
sizable black money are equipped to find ways around demonetization by
converting their existing cash to bullion, gold jewellery, real estate and
foreign currencies through brokers and middle-men. In fact, organized
middle-men and touts have already emerged to convert black money into white for
a commission.
As per The Indian Statistical Institute, Kolkata
study done on behalf of the National Investigation Agency (NIA), Rs 400 crores
worth of fake currency is in circulation in the Indian economy. This is only
.028% of Rs 14,180 billion worth currency demonetised in Rs 500 and Rs 1000
notes
Experts including a former RBI Governor and the
current Chief Economist of the World Bank have spoken against demonetization.
86% of currency in circulation is in Rs 500 and Rs
1000 notes. 97% of all transactions by volume are done in cash. Summary
demonetization has created chaos all over the country with people unable to
purchase daily essentials and, in many cases, life-saving goods and services. 5
persons, including one infant, have died as a direct result of the impact of
demonetization
Only about 30% of the Indian population has access
to the banking system as per data compiled by the banking division of the
finance ministry. Moreover, the distribution of banks is highly skewed with a
third of all bank branches in only 60 Tier 1 and Tier 2 cities/towns.
Consequently, people in rural India who often also suffer from inadequate
information have become the worst victims of demonetisation.
Reports have started coming in of digital payment
systems unable to keep up with the new volume of transactions with credit and
debit card servers also going down.
All currency has value only because of the inherent
trust in the banking system. Summary demonetization has shaken this trust and
will likely impact India’s economy well beyond the initial and widespread
chaos.
