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Demonetisation is an “also-ran” measure: RBI

Published

7 years ago

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Reserve Bank of India New Delhi. Photo: UNI

[vc_row][vc_column][vc_column_text]For the central bank, GST, insolvency and benami laws are more substantial moves to check black money[/vc_column_text][vc_column_text]By Parsa Venkateshwar Rao Jr

The Reserve Bank of India (RBI) in its half-yearly Financial Stability Report (FSR), released on December 29, 2016, has surprisingly moved the demonetization drive of the Modi government to one of the many initiatives. It is not at the top of the list though it has dominated public debate on the streets and in the media.

The central bank listed the bankruptcy law and the Goods and Service Tax (GST) as the two most important factors which would influence the performance of the economy. On demonetisation, the RBI said: “Other initiatives such as the withdrawal of legal tender status of specified bank notes (SBNs) could potentially transform the domestic economy.”

It would appear that Prime Minister Narendra Modi, Finance Minister Arun Jaitley and other ministers and BJP spokespersons would not trumpet demonetisation as the most important decision of the two-and-a-half-year-old BJP-led NDA government.

The RBI has noted several measures taken by the government to tackle the challenge of black money:  “…the government’s resolve to take on the shadow economy through various measures are expected to deliver net direct and collateral benefits to the economy in the long run, and will also improve India’s international standing. Such measures include, among others, the income disclosure scheme, setting up of a Special Investigation Team (SIT), enacting a law regarding undisclosed foreign income and assets, amending the Double Taxation Avoidance Agreement between India and Mauritius and India and Cyprus, reaching an understanding with Switzerland for getting information on bank accounts held by Indians and amending the Benami Transactions Act. Further, the initiatives for encouraging the use of non-cash and digital payments and withdrawal of legal tender status of specified bank notes (SBNs), accompanied by changes in income tax rules are expected to result in a shift away from the significant dependence of Indian economy on cash-based transactions….”

It is evident that the government’s boast and its attempt to spread the message that demonetisation was a bold and firm response to tackle black money and the “shadow economy” does not find favour with the central bank. It does not seem to consider demonetisation as the radical move that the Prime Minister and his colleagues have tried to project it as.

Addressing the issue of “shadow economy”, the FSR notes that it is a worldwide phenomenon and that it is difficult to define it in precise terms. It says, “The term shadow economy may refer to black economy or black money. There is no uniform definition of black money in economic theory and various other terms such as ‘unaccounted income’, ‘black income’, ‘dirty money’, ‘black wealth’, ‘underground wealth’, ‘black economy’, ‘parallel economy’ are also used in this regard. In the Indian context, the White Paper on Black Money, released by Department of Revenue, Ministry of Finance in 2002 adopted a definition of black money “as assets or resources that have neither been reported to the public authorities at the time of their generation nor disclosed at any point of time during their possession.”

And it notes, “In recent literature and usage, shadow economy is also referred to as System D. Though estimating the size of the shadow economy is challenging, according to the Organisation for Economic Co-operation and Development (OECD) half of the world’s workers were employed in the shadow economy in 2009 (this number is likely to grow to two-thirds by 2020).”

Compared to the populist twist that the government sought to give and make it appear that demonetisation was the magic wand that would conjure away black money, the FSR lays bare the complexity of the problem. It explains in clear language the connection between shadow economy, employment and tax rates. It says, “One of the many problems with the shadow economy is that it renders official statistics unreliable and severely impacts policy formulations by governments. Besides, the loss of tax revenues may force governments to hike tax rates, which in turn may further encourage greater activity in the shadow economy. As per some analyses, in the US a 1 percentage point increase in personal income tax rates, other things being equal, tends to increase the size of the shadow economy by 1.4 percentage points. Similarly, a 1 point increase in a regulation index (ranging from 1 to 5) corresponds to a 10 per cent increase in the shadow economy. There is also evidence in some economies of dynamic mobility between the official and shadow economies depending on the relative ‘net’ wage levels; this in turn is an indication of the influence of tax rates and rigidities in labour markets on the size of the official versus shadow economies.”

And it gives its clear view as to the best way of tackling shadow economy, black money et al, and it does not suggest even in an oblique manner that demonetization is the solution, or even that it is one of the solutions. It says, “While the impact of the shadow economy on direct tax revenues is a concern, its role in contributing to indirect taxes and economic growth is debatable. The best way to contain the shadow economy is to improve governance and quality of public services, avoid excessive regulations, impose stringent penalties and have a compatible tax structure.”[/vc_column_text][/vc_column][/vc_row]

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2024 Lok Sabha Elections

PM Modi takes a dig at Rahul Gandhi after Congress picks him for Raebareli, says daro mat, bhago mat

PM Modi, speaking at a Lok Sabha election rally in Bengal, said both Rahul Gandhi and Sonia Gandhi had fled their constituencies.

Published

13 hours ago

on

May 3, 2024

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Prime Minister Narendra Modi today commented for the first time to Congress leader Rahul Gandhi’s announcement of his candidacy for the Raebareli seat. Rahul is making his way towards Raebareli because he is afraid of Amethi seat, according to the PM.

The Prime Minister sneered as he said at a rally in Bengal that today he also want to tell him, Daro Mat (don’t be afraid), Bhaago Mat (don’t run).

Rahul Gandhi has often said, Daro Mat while accusing the BJP government of using investigaticve agencies to terrorise critics and political opponents.

According to Prime Minister Modi, there is no need for an exit poll or opinion survey because Congress would lose by a greater margin than the previous time.

Their tallest leader did not have the guts to fight the polls in Raebareli, Prime Minister Modi added, making reference to Sonia Gandhi. She went away and joined the Rajya Sabha in Rajasthan.

The PM reffered Rahul Gandhi as Shehzaada and said he would lose Wayanad, as he has predicted. He was searching for a second seat because of this. Also, their supporters said that he would battle from Amethi. However, PM Modi said, he is so afraid that he ran to Raebareli to find a way out.

Additionally, he claimed that the I.N.D.I.A bloc is only committed to the voting base of a specific locality.

Speaking out against the TMC and the Left-Congress allience in Bengal, Prime Minister Modi claimed he was not afraid since he had overcome poverty. Getting scared is not in his dictionary. He is determined to work for the country, he said.

Meanwhile, the Amethi-Raebareli decision was attacked by a number of BJP leaders, who claimed it was obvious that Rahul Gandhi knew he couldn’t win Amethi, where Smriti Irani is contesting again following her stunning success in the previous Lok Sabha election.

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2024 Lok Sabha Elections

Lok Sabha elections 2024: Rahul Gandhi to contest from Raebareli, KL Sharma from Amethi

Published

15 hours ago

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May 3, 2024

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The Congress party unveiled its list of candidates on Friday, and the party has picked Rahul Gandhi from Raebareli and Kishori Lal Sharma from Amethi has been nominated. After a great deal of speculation regarding the two Uttar Pradesh seats, the announcement was made.

Raebareli and Amethi have both been strongholds for the Congress. Rahul Gandhi lost against BJP leader and Union Minister Smriti Irani in the 2019 Lok Sabha elections from Amethi.

Taking to social media X, Congress announced their decision to field Rahul Gandhi from Raebareli and KL Sharma from Amethi, which was made at a meeting of the Central Election Committee.

Today is the final day to submit nominations for the  fifth phase of the election, which is scheduled to held on May 20th. Both the candidates will file nominations today. 

Priyanka Gandhi praised KL Sharma shortly after the nominees for the two prestigious seats were revealed, stating that his loyalty and dedication will help him win the election.

She wrote X, her family has known Kishori Lal Sharma ji for a very long time. His dedication to serving the public good serves as an example. The Congress Party’s decision to nominate Shri Kishori Lal Ji as an Amethi candidate is a matter of joy. She also said Kishori Lal Sharma will undoubtedly win this election because of his devotion to duty and loyalty.

However, given Union minister Smriti Irani’s success in Amethi in 2019, there is worry that Rahul Gandhi’s change of seat could work in the BJP’s favour. With her impending victory, the senior BJP leader has said that the Congress’s delay was due to cold feet and is prepared to defend the seat.

KL Sharma will contest against Smriti Irani in Amethi in the Lok Sabha elections. While, Rahul Gandhi’s opponent would be Dinesh Pratap Singh, who was named by BJP for Raebareli on Thursday. Singh lost the 2019 Lok Sabha elections to former Congress president Sonia Gandhi.

Meanwhile, Rahul Gandhi  is scheduled to hold a roadshow in Raebareli after filing of nominations. Congress President Mallikarjun Kharge will also visit Raebareli today.

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2024 Lok Sabha Elections

Brij Bhushan Sharan Singh’s son Karan gets BJP Lok Sabha ticket from Kaiserganj

Karan Singh Bhushan was on December 13, 1990. He competed at the national level in double trap shooting. He has a daughter and a son. Karan Singh Bhushan completed his Bachelor of Business Administration (BBA) and law from Dr Ram Manohar Lohia Avadh University.

Published

1 day ago

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May 2, 2024

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BJP on Thursday dropped sitting Kaiserganj MP Brij Bhushan Sharan Singh, who has been accused of sexual harassment by women wrestlers and gave a ticket to his son, Karan Bhushan Singh. Karan Bhushan, Brij Bhushan’s younger son, is the president of the Uttar Pradesh Wrestling Association. He is also the head of The Cooperative Bank in Nawabganj in Gonda district.

Karan Singh Bhushan was on December 13, 1990. He competed at the national level in double trap shooting. He has a daughter and a son. Karan Singh Bhushan completed his Bachelor of Business Administration (BBA) and law from Dr Ram Manohar Lohia Avadh University.

He has also holds a diploma in business management from Australia. Karan Bhushan Singh is presently the president of the Uttar Pradesh wrestling association. Earlier he was the senior vice president of the UP wrestling association. Elections will be take place in Kaiserganj in the 5th phase of Lok Sabha elections on May 20. Karan Bhushan Singh is likely to file his nomination from Kaiserganj on May 3.

There has been a lot of speculation and suspense on Brij Bhushan Sharan seat this time as the former Wrestling Federation of India (WFI) chief, who is also a 6-term MP, had been accused of sexual harassment by some of the India’s top wrestlers.

Many female wrestlers, including medallists, protested against the BJP leader and demanded his arrest over the charges of sexual harassment while he was serving the position of the WFI president. Wrestlers, including Sakshi Malik and Bajrang Punia, sat on a protest at the Jantar Mantar and demanded action against the Kaiseganj MP.

The Delhi Police later registered a case against Brij Bhushan Sharan Singh under Sections 354 (assault or criminal force to woman with intent to outrage her modesty), 354D (stalking), 354A (sexual harassment) and 506 (criminal intimidation) of the IPC, on June 15, 2023. But he was granted bail on July 20, 2023.

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