Black Money-Demonetization: Claims versus Facts
Demonetization will be the biggest feature for which Modi will be remembered in Indian history. Since such a massive propaganda and misinformation campaign was conducted by Modi-Shah, RSS, BJP and ‘Modi bhakts’ that a large number of people believe that it was a good exercise. In this blog I am stating the major claims versus the facts so that people can realize the magnitude of this tragedy inflicted upon India.
Inferring Some Truths
Since India will never officially learn certain aspects of the truth about ‘demonetization’ just like it never did about ‘Bofors deal’ truth will have to be inferred. These are some ‘inferred truths’ about ‘demonetization’:
- The decision was taken by Modi & Shah only without consulting Jaitley or RBI.
- Demonetization resulted in a loss of approximately Rs 4-5 lac crores to India.
Claims versus Facts
It was claimed to end or reduce black money. Facts:
o Unprecedented quantity of black money is fueling BJP’s election campaigns, buying of votes and elected representatives.
o The estimated Rs 4-5 lac crores held as black money by individuals got converted into white. If it had remained as black money then banks would not have been paying interest on it. Since 2016 banks have been paying interest on it. The interest payment has resulted in a loss to India of approximately Rs 30,000 crore.
o Latest report says that the amount of money held by Indians in Swiss banks has increased by 50% to over Rs 7000 crore. Most of it is obviously black money.
With government’s electoral bond scheme inflow of black money to political parties (primarily BJP) has been legalized. Since funds with political parties as also disclosure of identity of donors to political parties cannot be obtained through RTI, Indians can in no way know how much of black money is coming to BJP. Thus transparency has been deliberately eliminated by legislation!
It was claimed to reduce terror funding and reduce stone pelting in Kashmir. The facts show massive increase in terrorism and stone pelting.
Cash less Economy
The exercise was claimed to reduce cash transactions and increase the formal economy. As per latest report cash in the Indian economy has become more than Rs 19 lac crore. It was about Rs 17 lac crore prior to demonetization.
Removal of Fake Currency
The fake currency was not a major portion of the black money existing. It was claimed that this will be caught and removed from the economy. The fact is that the fake currency got deposited with the RBI and got converted into legal white money! It caused a loss of approximately Rs 10,000 crore to India. Fresh fake currency notes of Rs2000 and Rs 500 have entered the economy.
Future of Black Money in India
o Estimated value of black money in India was approximately 30% of GDP or approximately Rs 50 lac crore.
o Demonetization was to influence only approximately Rs 5 lac crore. The major part believed to be held as deposits/investments abroad, invested in real estate, held as foreign currency, invested in Gold, held by political parties, invested in share market was not touched by the exercise. From the rise in wealth of politicians and the richest Indians, Swiss bank investment, it can be safely inferred that it would have increased by about 5%.
o From the above analysis it is clear that demonetization was a big loss to India. Reply to an RTI brought an interesting fact to light, Rs 745 crore got deposited in Ahmedabad District Cooperative Bank with Amit Shah as Director in 5 days. This is the highest amount deposited in any single bank.
o With the current electoral bond scheme Modi led BJP does not need scams like ‘Bofors’ and ‘2G’ which Congress needed.
o As news reporter Ravish Kumar says so long as helicopters keep flying in election campaigning Indians can be assured that black money is flowing freely in India. It is my guess that there is more black money today than it was in Sonia misrule prior to 2014. Modi has outdone Sonia even in black money generation!