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Demonetisation is an “also-ran” measure: RBI

Published

10 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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India hits back at Shehbaz Sharif at UN, says terror will have consequences

India hit back at Pakistan Prime Minister Shehbaz Sharif’s UN speech, with New Delhi warning that terrorism will have consequences.

Published

6 hours ago

on

September 26, 2026

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India has responded to Pakistan Prime Minister Shehbaz Sharif’s remarks at the United Nations, delivering a strong message on terrorism and warning that such actions will have consequences.

The response came after Mr Sharif addressed the UN and raised issues concerning India and Pakistan. New Delhi rejected the narrative presented by the Pakistani prime minister and highlighted the issue of terrorism.

India’s message was delivered by Petal Gehlot, who represented New Delhi in the response to Pakistan.

India warns Pakistan over terrorism

India’s response focused on Pakistan’s record and its approach towards terrorism. New Delhi made clear that terrorism cannot be separated from its consequences and that those responsible cannot expect such actions to go unanswered.

The Indian side also pushed back against the claims and allegations made by Mr Sharif during his UN speech.

The exchange comes amid continuing tensions between India and Pakistan, with terrorism remaining a major point of disagreement between the two countries.

Shehbaz Sharif’s UN remarks

In his address, Pakistan Prime Minister Shehbaz Sharif spoke about India-Pakistan relations and raised several issues concerning New Delhi.

India subsequently exercised its right of reply to respond to Pakistan’s statements at the United Nations.

New Delhi’s response underlined its position that terrorism remains a serious issue in the relationship and that there would be consequences for terrorist actions.

The latest exchange at the UN adds to the continuing diplomatic confrontation between the two neighbouring countries.

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Veeramani POCSO case: Vijay questions Stalin over earlier probe

Tamil Nadu Chief Minister Vijay has questioned MK Stalin over the handling of the Veeramani POCSO case, while Stalin has rejected allegations that the previous DMK government protected anyone.

Published

19 hours ago

on

September 25, 2026

By

Actor Vijay

Tamil Nadu Chief Minister and Tamilaga Vettri Kazhagam (TVK) president C Joseph Vijay has questioned DMK president MK Stalin over the handling of the POCSO case involving Gem Granites founder R Veeramani. The political exchange follows renewed investigation into allegations involving minor girls.

Vijay’s remarks came as the ruling TVK stepped up its questions about how the case was handled during the previous DMK government. The party’s IT wing has alleged that the earlier investigation was weakened and questioned why a final report was filed.

The allegations have been rejected by the DMK. Stalin has said that no order was issued by the DMK government to protect anyone in the case and has called the allegations false and defamatory.

What did Vijay say about the Veeramani case?

Vijay questioned Stalin over the handling of the case and demanded an explanation from the former chief minister.

The TVK has specifically questioned why action was not taken against Veeramani during the previous administration and why the earlier investigation resulted in a closure report.

The party has also raised questions about the role of officials involved in the earlier investigation. These are political allegations made by the TVK and have not been established as facts.

What is the Veeramani POCSO case?

The case concerns allegations of sexual abuse of minors involving R Veeramani, the founder of Gem Granites.

The case came under renewed scrutiny after a special POCSO court rejected an earlier closure report and ordered further investigation. The expanded probe has subsequently identified additional alleged survivors who were minors at the time of the alleged offences, according to current reporting.

The investigation is also examining the circumstances surrounding the earlier probe and whether there were any lapses in how the case was handled.

What has MK Stalin said?

Stalin has rejected allegations that the previous DMK government protected Veeramani.

He has said that no order was issued by the DMK government to shield anyone in the case. Stalin has also said that everyone responsible for the alleged offences, including anyone who aided or attempted to protect the accused, should face the law.

The DMK president has further said that the focus should remain on securing justice for the affected girls rather than making political allegations.

Why has the case become a political issue?

The Veeramani case has become the subject of a political dispute between the ruling TVK and the DMK over the handling of the earlier investigation.

The TVK is questioning the previous government’s handling of the case, while the DMK has denied that it intervened to protect the accused.

At this stage, claims about political interference or deliberate weakening of the earlier investigation should be treated as allegations unless established by the ongoing investigation or judicial proceedings.

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Women wrestlers challenge Brij Bhushan’s acquittal in sexual harassment case

Four women wrestlers have challenged the acquittal of former WFI chief Brij Bhushan Sharan Singh and co-accused Vinod Tomar in a sexual harassment case.

Published

20 hours ago

on

September 25, 2026

By

Brij Bhushan Sharan Singh

Four women wrestlers have approached a Delhi court challenging the acquittal of former Wrestling Federation of India (WFI) chief and BJP leader Brij Bhushan Sharan Singh in a sexual harassment case.

The wrestlers have also challenged the acquittal of co-accused Vinod Tomar. The matter is scheduled to be heard by a Special Judge at the Rouse Avenue Courts.

The appeal challenges the order passed by an Additional Chief Judicial Magistrate on August 3, 2026, when Brij Bhushan and Tomar were acquitted in the case.

Wrestlers challenge court’s reasoning

In their appeal, the wrestlers have argued that the acquittal order is legally unsustainable and that the evidence was not assessed appropriately.

They have also alleged that the order relied on assumptions about how victims of sexual assault and harassment were expected to behave instead of assessing the evidence and circumstances of the complainants.

The challenge seeks judicial scrutiny of the findings that resulted in the acquittal of Brij Bhushan and Tomar.

Brij Bhushan was acquitted in August

The Rouse Avenue court acquitted Brij Bhushan Sharan Singh on August 3 in the sexual harassment case involving women wrestlers. The court’s decision followed consideration of the evidence and statements presented during the proceedings.

The case had emerged after several women wrestlers accused the former WFI chief of sexual harassment. The allegations had led to a major protest by wrestlers in 2023.

The latest appeal means the acquittal is now being challenged before a higher court.

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