Demonetization: Claims and Facts

Claim: Demonetisation will hit black money

Fact:

K.C. Chakrabarty, former deputy governor of Reserve Bank of India (RBI) between June 2009 and March 2014, says, “What is black money? No notes are black. All notes are white. It is the process that creates the black money. When a person does not pay tax, it becomes black money. Here you are killing the notes and not the fellow who is not paying tax.”

90% of black money is not kept as cash, nor is it stored in sacks under beds. Rather, it is kept in the form of gold or as dollars or other foreign currency in Swiss banks or invested in real estate.

Modi himself declared that 90% of the black money is in foreign countries, which he promised to bring back. Instead, he made it easier to send wealth abroad! As per the LRS (Liberalised Remittance Scheme) introduced by the Modi government, the upper limit of money that can be sent abroad has been raised to 2,50,000 dollars from 75,000 dollars! Making use of this new ‘reform’, 2,047.2 million dollars have been sent abroad in just six months of current fiscal year, which is nearly 4 times the money sent in previous years.

Claim: Demonetisation Hits The Rich, Not The Poor

Uma Bharti has claimed that Modi’s demonetization move is so pro-poor as to qualify as Marxist! Modi himself has said it is like ‘kadak chai’ – strong tea – that the poor enjoy but the rich find bitter.

Fact:

Who Suffered, Who Died?

It is the poor who are in queues, who are going hungry, not the rich.

Not a single super-rich corrupt person is among the 70 who have died due to demonetization – these are common people dying of lack of medical care, shock and stress

Small traders, vendors, businesses have been badly hit, while digital brands like Paytm, Big Bazaar are being officially promoted

Farmers dependent on cooperative banks were desperately starved of cash to buy seeds on time for sowing – until the Government belatedly allowed old currency to be used for this purpose.

Women who quietly save up cash nest-eggs as a safety net, often without the knowledge of other family members, have lost both their financial security and privacy at one go

Who Is Celebrating?

The likes of Gautam Adani (crores of whose huge unpaid loans were waived by the Government), Vijay Mallya (who looted banks and scooted thanks to the Modi Government’s help) and Lalit Modi who was also enabled by Modi’s own Ministers and party leaders to escape corruption charges in India have tweeted fulsome praise of demonetization. Aishwarya Rai, named in the Panama Papers, came out in public support of demonetization. An ‘anti-corruption’ move praised most by the corrupt!

Weddings of common people are disrupted all over India. But corrupt Bellary mining baron and former BJP MLA Gali Janardana Reddy lavished Rs 550 crore on his daughter’s wedding, while Mukesh Ambani held a huge pre-wedding extravaganza for his niece. So, the lives and wealth of the super-corrupt and super-rich are not affected in the least by demonetization.

Modi who first personally advertised Reliance Jio, has now used demonetization to personally appear in a Paytm ad. (Note, the PM is promoting Paytm, a company in which the largest share is owned by the Chinese company Alibaba, rather than the RBI’s own cashless Unified Payment Interface app). RBI is allowing Big Bazaar supermarket to dispense new currency. Small shops and vendors are crying, big digital business is raking in huge windfall gains!

The U-Turn Party

The BJP itself called demonetization ‘anti-poor’ when it was partially introduced by the RBI during the UPA tenure!

In 2014 when the RBI announced that currency notes printed before 2005 would be withdrawn, the BJP lashed out at that emasure – even though that move did not even come close to causing the chaos that the BJP Government’s has done.

BJP leader Meenakshi Lekhi then said:

“Because those who have black money, who live in the cities, or have the means, they will exchange the notes for new ones. But the poor, the aam aurat and aadmi, or the woman who has saved her husband’s money and kept it in an aata ke dabba or hidden in the dal or chawal, their lives will be affected.”

Lekhi said that those who keep their savings in US dollars and other foreign currencies would not be hurt, but those who kept their cash in rupees would be badly hurt. She declared that the move was “an unjustified attack on poor people” and demanded that the “RBI must publish a note on how many currency pieces will be affected, how many of these are in rural India, and estimate the impact of this measure on the poor. RBI must conduct a full and impartial inquiry into the impact this measure will have.”

How come partial demonetization is ‘anti-poor’ when UPA does it, but sweeping, sudden, secret demonetization causing palpable, lasting chaos and distress is ‘pro-poor’? Will the BJP agree for a “full and impartial enquiry” into the demonetization impact, or will it simply demand that we accept the findings of the farcical and biased Modi app survey?

Claim: Demonetisation will eliminate counterfeit currency, terror financing

Fact:

Former RBI Deputy Governor K.C. Chakrabarty pointed out, “If you buy a kilo of rice, there will be some small stones (interspersed). What you do is remove those particles and not the entire rice. The law enforcement authorities should identify those notes and take action. Here people are standing in the queues to get their own money because there are inefficiencies with the income tax (process), police machinery etc....

According to a NIA-sponsored study by the Kolkata-based Indian Statistical Institute, fake Indian currency notes (FICN) are to the tune of Rs 400 crore, with as many fake 100 rupee notes as 500 rupee notes. Let’s assume that Rs 350 crore worth of FICN have become defunct. Was it worth spending Rs Rs 15000 crore of tax payers’ money and untold grief and suffering for people just to get rid of Rs 350 crore worth of FICN? And since the new notes have no enhanced security features, new FICN is bound to be generated soon. This is like mopping the floor with the tap on!

If high denomination currencies are easier for the corrupt to hoard and criminals and terrorists to use, does not their task become easier with the introduction of Rs 2000 notes? How come police claim to have discovered Rs 2000 notes on two alleged ‘terrorists’ recently killed in Kashmir?

Claim: Demonetisation will turn India into a cashless, digitized, corruption-free economy

Fact:

More cashlessless does not mean less corruption

Nigeria is one of the most cashless economies in the world – and also one of the most corrupt. India’s cash-to-GDP ratio is not much more than that of the Euro-zone countries. Linking cash flows alone with corruption is illogical and baseless.

Digitalisation is always vulnerable to hacking, theft and other economic crimes
More than 40% of adults in India still lack access to banks – surely the priority ought to be to increase banking services?

The poor and vast swathes of rural India are yet to have internet coverage, let alone have access to a cashless economy. Sudden withdrawal of cash from the system cannot suddenly turn them into citizens of a cashless corporatized India!

Claim: Demonetization Fights Corruption

Fact:

Modi himself as well as his Government and close associates are personally implicated in corruptions scandals and inappropriate transactions. These scandals are not being investigated even as Modi claims to be an anti-corruption crusader!

Loan of wilful corporate defaulters amounting to more than 70 thousand crores of rupees have been waived off. Adani, Ambani and Vijay Mallya are included the list of those who don't need to pay back people’s money kept in banks anymore. Demonetisation has forced people to deposit money in banks, and now the government will allow corporates to prey on this money. It is possible that more Vijay Mallyas will be given loans from this money and then allowed to run away.

The Sahara-Birla papers exposed by Prashant Bhushan recently show that Modi, while Gujarat CM, received huge pay-offs from Birla and Sahara.