DEMONETISATION
YET ANOTHER FRAUD ON THE PEOPLE
Those who take the meat from the table
Teach contentment.
Those for whom the contribution is destined
Demand sacrifice.
Those who eat their fill speak to the hungry
Of wonderful times to come.
Those who lead the country into the abyss
Call ruling too difficult
For ordinary men.
– Bertolt Brecht
In
a televised address at 8 pm on November 8, 2016, Prime Minister Narendra Modi
announced that currency notes of Rs 500 and Rs 1,000 denominations would no
longer be legal tender from midnight that night.
He stated that people holding Rs 500 and Rs 1,000 notes could deposit them in
their bank and post office accounts till December 30, 2016. He further
announced that new notes of Rs 500 and Rs 2,000 will soon
be introduced. The Prime Minister stated that this step was being taken to curb
counterfeiting and funding of terrorism with fake notes, and most importantly,
to crack down on black money in the country.
The
total currency in circulation in the country is around Rs 17.9 lakh crore. Most
of this is in Rs 500 and Rs 1,000 notes, these accounting for 86% of the
currency in circulation. Therefore, till the government replaces the abolished
currency with new currency notes, for the present, 14% of the currency has to
serve the task of the whole. The total value of the Rs 500 and Rs 1,000 notes
in circulation is around Rs 15.44 lakh crore, and these were printed over a
span of 15 years.1 To prevent
the economy from collapsing, the government has to quickly replace them. Even
though the Prime Minister claimed that the step was being planned for more than
nine months,2 the
monumental inefficiency of the Modi Government becomes evident from the fact
that it made no advance preparations for quick replacement of the old notes
with new notes. According to a newsreport that quoted former Finance Minister
P. Chidambaram and also a former Reserve Bank of India (RBI) Deputy Governor,
even if the government prints note for note, given the capacity of the four
currency note printing presses in the country, it is going to take at least six
to seven months for these printing presses to print new 2
Demonetisation: Yet Another Fraud on the People notes
to replace all the scrapped notes.3 Once
printed, the notes must reach granular India—5,93,731 inhabited villages, 4,041
towns, 3,894 census towns and 1,456 urban patches.4
The printing of such a huge quantity of notes requires large
quantities of paper and ink, which are largely imported. Such an elementary
step as importing the required quantity of ink and paper was also not done in advance—ink
is already in short supply and the government recently floated a tender for importing
it.5
The
sudden move without adequate preparation for its consequences has led to chaos
across the country. With 86% of the currency sucked out of the system, even
though nearly two months have passed since the demonetisation announcement,
there is still very inadequate cash with the banks. People were first forced to
queue up outside banks for hours to exchange/deposit their old notes. After
that, they now have to stand outside banks almost daily in long queues to
withdraw their money, because even after standing in line for hours, at the
most people are able to withdraw only Rs 2,000–4,000 at a time. The worst hit
are the daily wage workers, as they are forced to forgo a day’s wages in order
to stand in the queues. Dozens of people have actually died waiting in these
queues.
Adding
to the woes of the people are non-functioning ATMs. Initially, the problem was
that the ATMs were not calibrated to distribute the new Rs 2,000 and Rs 500
notes. It was only by early December that nearly 90% of the ATMs got
recalibrated. But even after that, the problem of standing outside ATMs in long
queues has not reduced, as there is not enough cash, and so either one can withdraw
only small amounts at a time, or the ATMs run dry just 2–3 hours after being
refilled.
The
situation is worse in the rural areas, where the banking network is not so
widespread and one bank branch caters to several villages. Banks often have no
cash for 2–3 days, and even when they get cash, it is so
insufficient that people often have to go home empty-handed after standing in
line for hours.
The
government’s ineptitude is also revealed in its decision to first introduce the
Rs 2,000 note rather than the Rs 500 note. It shows how much our policy makers
are cut off from the people. After standing in queues
for 3–4 hours, people get most of their withdrawals in Rs 2,000 notes. This
does not ease their financial difficulties one bit, as the shortage of lower
value currency notes has made it virtually impossible for
them to use it to buy essential items like milk and vegetables, as shops have
no change to pay back. Lokayat
and Janata Trust 3
BJP–RSS
activists have put up banners all over the country, asking people to patiently
wait in the long queues as a sacrifice for the country, as Modi’s
demonetisation policy will soon end black money and give the economy a big
boost, leading to a fall in housing and food prices. Many people too think that
this step will indeed end terrorism and curb black money, and so the troubles
being faced by them are worth it.
EXAMINING
THE GOVERNMENT CLAIMS
Let
us examine the claims of the government about the benefits of demonetisation
one by one.
i) Will It Overcome the Problem of Terrorist
Financing?
Terrorists
need financing. They use both banking channels and fake notes. The major part
of their financing is done through banking channels, using various innovative
techniques. That cannot be curbed by demonetisation.
And so far as fake notes are concerned, to the extent that terrorism is
financed from abroad, state actors are involved in printing these fake notes.
That too cannot be curbed by demonetisation. So, we are only indulging in
self-deception if we believe that demonetisation is going to curb terror
financing.6
ii) Will It Overcome the Problem of Counterfeit
Notes?
According
to the RBI, there is only Rs 400 crore worth of counterfeit currency in
circulation in the country—a tiny amount of the total currency in circulation
of Rs 17.9 lakh crore.7 Is it
really worth attempting to eliminate such a small amount (0.022%), while giving
so much trouble to the ordinary people? And very soon, the new notes will be
faked too. In the USA also, there are a large amount of fake dollars in circulation;
the dollar is in fact among the most counterfeited currencies in the world.8
iii) Will It Significantly Curb the Black
Economy?
People
think that black money means bundles of notes tucked away in suitcases or pillows
or lockers. That is not the case. Then what is black money? For this, it is
important to understand the difference between three
terms: black money, black income and black wealth. All three are different, and
together comprise what can be called the ‘black economy’. People mix up these terms, and use them
interchangeably.
First
you earn income; out of this, you consume one part, and save the rest. This
saving you invest in various assets. That gives you your 4
Demonetisation: Yet Another Fraud on the People wealth.
Wealth is held as a portfolio—you can invest it in real estate, gold, share
market, etc. or hold it as cash. Thus, cash is only one component of your
wealth, and a very small part of it.
Coming
to the black economy, here, first, black income is generated through a whole
range of activities. These activities can be entirely illegal, such as the
drugs trade, or the manufacture of fake medicines, or the
arms trade, and so on. Or they can be activities which are completely legal,
but are undeclared (either wholly or in part), as people want to avoid taxes.
These can include: under-reporting of income by doctors or lawyers to save
taxes; under-reporting of profits by industrialists by means such as
overstating costs (for example, by showing purchase of raw material at higher
than actual prices) or understating production; and
under-invoicing and over-invoicing in international trade.
It
is not the case that only black activity or black business is carried out with
cash, and white or normal activity is carried out by cheque or credit card or
other such means. Normal business also requires cash. So, normal cash holding
and black cash holding are not two different things. One may ask: that may be
so, but is it not that black business is more dependent on cash transactions
than white? The answer to this also is no. In both black and white business,
cash is held for shorter or longer period, and then thrown into circulation,
and this is equally so for both types of business. Therefore, if currency is demonetised,
both white and black cash holdings are affected, and both are equally affected.
To put the same argument in another way, black businessmen are as much
capitalists as white businessmen. It is only misers who hoard money;
capitalists believe in investing money to earn more money. And so, black money
holders, like white money holders, also try to expand their business by
investing their black money/income. Therefore, just like
white money holders, black money holders also will be holding only a small
fraction of their total income in cash at any point of time.
The
point we are trying to make is, only a part of the black income is held as
cash. Most black money holders invest their incomes in assets, which yield
returns, such as buying land or shares with it, or sending it abroad through
various means. A recent Hindustan
Times report has also given several arguments
to show that black money hoarders keep very little of their earnings in cash.
It goes on to quote a finance ministry official
as saying that ill-gotten wealth mostly enters the formal economic system
through real estate and shell companies.9
The
part of black income that
is kept in cash is what is actually black
money, while that invested in assets is black wealth.
Demonetisation at the most affects black money; it does not affect black income
generation, nor does it affect black wealth one tiny bit.
Let
us consider a concrete example of black income generation to understand this in
greater detail. An especially important sector where black incomes are
generated, and where black incomes are invested in a big
way, is real estate. Funds are taken out of the country through various illegal
means such as hawala channels, or over-invoicing of imports, or under-invoicing
of exports, or transfer pricing. They are then brought
back into the country as foreign investment or FDI (this is known as
“round-tripping”) through channels such as the infamous Mauritius route. In
this, sham corporations are registered in Mauritius, through
which funds are routed into India, often through a mechanism called P-notes
(participatory notes, where the ultimate investor is not identified to the
Indian market regulator Sebi). The earnings on such investments
are not taxed in India because India and Mauritius have a double tax–avoidance
treaty (according to which a Mauritian entity investing in India does not have
to pay capital gains tax in India, and only pays taxes in Mauritius), while at
the same time the investors pay little or no taxes in Mauritius too because of
the tax structure there. The amendments to the Indo–Mauritius Treaty done in
May 2016 will not have much of an impact on this “round-tripping” of funds, as
firstly, Pnotes are exempted from this amendment, and secondly, there are other
routes available through which such funds can be routed into India without
attracting much tax, such as through Netherlands.10 FDI
flows into the real estate sector have zoomed in recent years—between 2005 and
2010, FDI in India’s real estate and housing market jumped 80 times. In 2010,
nearly $5,700 million of foreign funds were invested in this sector. It is this
infusion of black money into real estate that has contributed to the sharp and
sustained rise in land prices, making housing unaffordable for an overwhelming majority
of Indians.11
We
have discussed the round-tripping of black money in some detail to explain how
a major part of black incomes is invested via phoney legal means, through
banking channels. And this is not going to be affected by demonetisation. That
will only be curbed if the government takes steps to curb the illegal parking
of funds abroad, and its round-trip back to India.
Dispelling an Important Myth About Black Money
Before
we go ahead to estimate the size of the black economy, it is important to
discuss an issue being raised by persons like Baba Ramdev, who have these days
donned the mantle of ‘economics experts’. They are claiming that the central
problem of the Indian economy is “black money”, and are trying to create the
impression that if this problem is solved, poverty would vanish, unemployment
will decline, and so on.
This
view is wrong for a number of reasons:
(i) Firstly,
capitalism is all about making profits. And therefore, under
capitalism, the line between what is legal and what is illegal, the line
between ‘white capitalism’ and ‘black capitalism’, is a tenuous one. Thus, when
the government gives tax concessions to the rich, the savings made by the rich
are considered legal, but when ordinary people do not declare their incomes to
save on taxes, that is considered illegal; when the government transfers land
at throwaway prices to the corporate houses, that is considered legal, but when
ordinary people buy land out of their hard earned savings to build a house, and
under-report the land price to save on taxes, that is considered illegal; when
pharma companies through their network of Medical Representatives encourage
doctors to prescribe unnecessary
medicines to patients, this is plainly unethical, and should be labelled as black
activity, but it goes on in a big way; and so on . . .
(ii)
Then again, the definition of what constitutes ‘black
activities’ varies from country to country! Thus, banks investing people’s savings
in the stock market is considered illegal in India, but is perfectly legal in
the United States.
(iii)
Finally, even if there were no black economy, the inherent
law of capitalism, which produces wealth at one end and misery at the other,
would still operate. And this is becoming worse in today’s era of neoliberalism.
The people who are blaming the black economy for the misery of the masses are
actually doing so to hide from the people the real reasons for their poverty
and unemployment.
All
this is of course not to argue that steps should not be taken to curb the black
economy. That should be done. But it should be clear that this is only one of the many problems gripping the
Indian economy, and furthermore, is not the most important problem.
The most important problem today is the economic policies being implemented
under the name of globalisation–privatisation–liberalisation. It is these
policies that are
responsible for the huge rise in poverty and destitution, the worsening
unemployment situation, the rising inflation, and the worsening agricultural
crisis that has pushed more than 3 lakh farmers into committing suicide over
the past decade.
Estimating the Size of the Black Economy
It
is very difficult to make an estimate of the size of the black economy.
Estimates of the black income generated every year vary from 25% to 75% of GDP.12
An authoritative analysis has been made by Prof. Arun
Kumar, an eminent economist who was Professor at the Centre for Economic
Studies and Planning at the Jawaharlal Nehru University. He estimates the black
income generation in India to be 62% of GDP. This is fairly close to the
estimate made by a report of the National Institute of Public Finance and
Policy in 2014 that estimated domestic black money as being equal to 70% of
GDP.13 The GDP for
2016–17 is estimated at Rs 150 lakh crore, so 62% of that would be roughly Rs
93 lakh crore. This then is the size of the black income being generated in the
economy this year. Black wealth would be several times this amount, as it has
been accumulating over the years. Even assuming a low figure of say three times,
this means black wealth would be around Rs 300 lakh crore.
Let
us now make an estimate of the black money in circulation as cash in the
economy. It is this ‘black cash’ that the government is attempting to
demobilise by demonetisation. The Rs 500 and Rs 1,000 notes in circulation in
the economy total Rs. 15.44 lakh crore. But not all the notes in circulation
are a part of the black economy. Thus, for instance, a significant proportion
of our GDP—around half, according to current
CSO estimates—is produced in the informal sector, and around 85% of the
population relies on it.14 While the
incomes in this sector are mostly unrecorded, the dominant part of this is not
‘black’. It is true that the incomes in this sector do not fall into the direct
tax net, but then in any case these incomes are too small to pay direct taxes;
on the other hand, due to the tax structure of the Indian economy which
collects more
revenue from indirect taxes rather than direct taxes (70:30), they anyway are
subject to indirect taxes.15 In this
sector come the income of farmers and small traders and daily wage workers and
small service providers
and other such sections of the population. Most of the transactions in this
sector are in cash. Apart from this informal sector, a significant portion of
the cash in the economy is in businesses, like petrol pumps,
railway stations, airports, etc., and this too is not black.
Therefore,
of the total currency in circulation, assuming that half is in the informal sector,
and of the remaining, at least 50–60% is in businesses as legal currency, that
leaves just around Rs 3 lakh crore as black money.16
Indeed, a former governor of the RBI, D. Subbarao, a
supporter of the demonetisation move, has also mentioned this as the maximum
amount that can be rendered worthless by this move.17
a
Demonetisation is
going
to affect at the
most
3% of black
income generated this
year
in the economy!
Table: Estimating Black Money in the Economy
Total GDP
of India in 2016 Rs 150 lakh crore
Estimated size of Black Economy 62% of GDP
Total amount of Black Income generated
every year
Rs 93 lakh crore
Total value of Rs 1,000 and Rs 500 notes
(1) Rs 15.44 lakh crore
Legal currency in circulation in
informal
economy (2) 50%
of (1)
Legal currency in the formal sector (3) 25–30% of (1)
Estimated Black Money in circulation in
Economy (1–2–3)
20–25% of (1)
Total value of Black Money demonetised 20 x 15.44 / 100 = ~ Rs 3 lakh crore
Black Money as % of Black Income
generated
every year
3 / 93 x 100 = 3.2%
The
maximum amount of black money that can be demobilised by demonetisation—Rs 3
lakh crore—is just 3% of the total black income being generated in the economy
this year (Rs 93 lakh crore), and 1% of the
black wealth (assuming black wealth to be a low Rs 300 lakh crore). Even
assuming that the government is completely successful in eliminating this Rs 3
lakh crore of black money, it is only eliminating a very small fraction of the
total black income being generated in the economy this year, and an even
smaller fraction of the black wealth.
Will Government be Able to Eliminate Rs 3 Lakh Crore?
Assuming
that only the top 3% of the population has black money, this means 3.6 crore
people have black money—of around Rs 3 lakh crore. This works out to an average
black money holding of less than Rs 1
lakh per person; and the government is permitting people to deposit Rs 2.5 lakh
per person without questions being asked! Of course, not everyone in the top 3%
of the population has black income, and so many would have black money more
than this limit specified by the government. But then, they are finding
innovative ways of converting their black money into white. Thus, on the day
the demonetisation announcement
was made, jewellery shops were reported to be open till 3 am, issuing backdated
receipts for purchase of gold, jewellery, etc.
People
are also resorting to stratagems like employers paying employees salaries for
several months in advance, or giving money to the poor to deposit in their Jan
Dhan accounts, to be returned later as white money. Of the 25 crore Jan Dhan
accounts opened by the poor, 3 crore accounts have seen a total of nearly Rs
29,000 crore in increased deposits. The tax department simply does not have the
infrastructure or resources to investigate these 3 crore Jan Dhan accounts.18
Modi’s pet project of financial inclusion has itself become a
robust platform for money laundering!
So,
in all probability, the government will not be able to demobilize even Rs 3
lakh crore; at best it may demobilise around Rs 1 lakh crore. This is precisely
what is happening. By mid-December, of the Rs 15.44 lakh
crore of high value notes in circulation, around Rs 13 lakh crore had already
come back to the banks, and with a fortnight to go for the deadline to end,
experts are predicting that it may all end up with nearly 90–95%
of the money coming back.19
To
quote Prof. Arun Kumar, “If the bulk of the money comes back into the system,
it will be seen as the most foolish decision by the government involving all
pain and no gain.” He stated that the whole exercise will then simply be
described as replacement of current stock with negligible demonetisation.20
On
December 6, Revenue Secretary Hasmukh Adhia too admitted that the government
was expecting all scrapped notes of Rs 500 and Rs 1,000 to come back into the
banking system.21 Clearly,
the government is going
to fail in achieving its third objective too.
Past Experience Too Proves This
This
is not the first time that demonetisation has been done. In 1978, the Morarji
Desai Government too had demonetised currency, but it had only demonetised high
value notes—Rs 1,000, Rs 5,000 and Rs 10,000 notes.
In 1978, Rs 1,000 was a lot of money. The step did little to curb the black
economy, but at least it did not affect the ordinary people, as they did not
use these high value notes; the notes demonetised accounted for only 0.6% of
the currency in circulation; and so life went on as usual. However, even then,
the then RBI Governor I.G. Patel had pointed out that “such an exercise seldom
produces striking results” since people who
have black money on a substantial scale rarely keep it in cash. “The idea that
black money or wealth is held in the form of notes tucked away in suitcases or
pillow cases is naïve.”22
CAN
DEMONETISATION CURB BLACK ECONOMY?
Be
that as it may, what is even more fatuous about the government’s exercise of
demonetisation is that it is aimed at demobilising only the black money (that
is, the illegal cash) stored with people, which is only a fraction
of the black income generated in this year, and is an even smaller fraction of
the black wealth accumulated in the economy over the past several years. The
government is not taking any steps to eliminate,
or even curb, black income generation. So, even assuming that a part of the
black income generated this year will be demobilised by demonetisation, black
income is going to be generated in the coming year too, and the year after
that, and so on, and it may even be more than that generated this year.
Be
it narcotic drugs or charging capitation fees, or be it hiding of incomes by
lawyers and doctors, or be it understating
real estate deals or understating industry profits, or be it under-invoicing
and over-invoicing in international trade, all this is going to continue in the
coming years too. Black money in the form of cash
will again be generated in all these transactions. And since the government has
introduced notes of an even higher denomination, that is Rs 2,000, storage of
black money is going to be much easier!
There
is another reason why the black economy cannot be attacked by demonetisation.
As the classical political economists, Adam Smith and David Ricardo, had
pointed out, long before Marx, capital always flows
from the less profitable to the more profitable activities. Therefore, till the
government takes steps to make black income generation unattractive, till then,
so long as “black activities” remain profitable, they are going to attract
capital.
IS
GOVT.
SERIOUS ABOUT
CURBING BLACK ECONOMY?
Many
people will argue: even if demonetisation cannot significantly curb the black
economy, at least the Modi Government has shown its willingness to attack it,
and will soon come up with more steps to eradicate
this menace.
Even
assuming this to be true and assuming that the government initially wants to
tackle black money only (and not black income generation), the method adopted,
of demonetisation, is bizarre. To give an analogy, if there is a crime in a
locality, this is like the police calling all the residents of the locality to
the police station to investigate whose hands have bloodstains, or whose eyes
are bloodshot, or who was where at the time of the crime, and so on.
The
correct way to pursue the case is to diligently investigate all the leads
available, and then call in for questioning
only those who are the suspects. Similar is the case with black money. If there
is an honest tax administration that operates without interference, it can
through painstaking efforts unearth substantial amount of black incomes and
black wealth. Irrespective of how high and mighty a person is, if he/she is
prosecuted and sent to jail for tax evasion/black activities, that will act as
a deterrent to others. This is
what is done in all countries that have taken some effective steps to curb the
black economy, such as the US or UK—they have acted to curb the black economy
by serious investigation and prosecution.
In
contrast, the Indian Government, in the name of curbing black money, has
through demonetisation put into enormous hardship all people with cash, a
majority of whom actually have white money. At the same
time, it is wilfully not taking any action against those who really are deeply involved in black income generation and
have huge hoards of black wealth. This is evident from so many examples.
For
instance, black money is generated in election funding. It is estimated that
probably nearly Rs 30,000 crore was spent by parties in the 2014 Lok Sabha
elections. A major part of this was spent by Narendra Modi
for his high-voltage electioneering. If the BJP was indeed serious about
curbing black money, it should have declared the sources from where it got its
funding, and pressurised other parties to declare their sources of funding too.
As per the law, parties don’t have to reveal the names of donors for donations
of amounts below Rs 20,000; taking advantage of this loophole, all parties,
including the BJP, Congress and others,
declare most of their donations as being below this. Modi could have moved to
change this law, and asked every party to reveal the name of each donor, no
matter how small the donation, and thus bring
in
transparency in political funding.
A
large part of the black money generated every year is parked in land and
gold/jewellery. The government
can easily monitor big land deals and gold–jewellery purchases, and put them
under scrutiny. Then again, our intelligence agencies are tracking export deals
on a daily basis. A Hindustan Times analysis
of RBI data, gleaned from 1972 to 2015, shows that 1,88,605 export transactions
were not remitted home, and involved exports worth Rs 17 lakh crore.23
This means that the government has the details of the deals
through which money is being funnelled abroad. If the PM wants, he can easily
stop this outflow.
If
BJP is serious about
the
war on black economy,
why
does it not declare
its
own sources of funding?
As
discussed above, a known way of storing black incomes is by sending the money
abroad, and then bringing it back to invest in securities through ‘P-notes’,
which do not require the buyer to reveal his/her identity. Both the UPA and the
supposedly anticorruption BJP have been reluctant to impose curbs on P-notes.
Even after the government recently amended the Indo–Mauritius Double Taxation
Avoidance Treaty, taxation of P-notes was left untouched.24
Another
obvious step that the government can take is to go after those who have stashed
their money abroad. In February 2012, the director of India’s Central Bureau of
Investigation stated that an estimated $500 billion or Rs 24.50 lakh crore has
been stashed away by Indians in foreign tax havens, more than any other
country.25 Modi had in
fact promised to bring this back in his election speeches, to the point that
people had actually believed that the government was going to deposit Rs 15
lakh in each of their Jan Dhan accounts. But after winning the elections, the
BJP Government made a complete U-turn on the issue and
has even gone to the extent of refusing to divulge the names of foreign account
holders in the Supreme Court. Commenting on the application moved by the
attorney general on behalf of the government in
the Supreme Court, senior advocate Ram Jethmalani, who was the petitioner in
the case, stated, “The government has made an application which should have
been filed by the criminals. I am amazed.”26
Actually,
this is not surprising. Journalist Josy Joseph, author of the book A Feast of Vultures,
writes that the biggest case of black money parked in offshore havens being
investigated by Indian authorities is that of business tycoon Gautam Adani.27
Considering the close relations between Adani and Modi, and
the fact that Adani grew from being a small time businessman to one of India’s
biggest business tycoons during just the decade when Modi was Chief Minister of
Gujarat, it is obvious that Adani will never be prosecuted.28
In
2016, 11 million documents held by the Panama-based law firm Mossack Fonseca
were leaked by an anonymous source, and obtained and made public by the
International Consortium of Investigative Journalists.
The documents show the myriad ways in which the world’s rich exploit secretive
tax havens to hide their wealth. The leak, that became known the world over as
the Panama Papers scandal, contained the
names of 500 Indians who have links to offshore firms, including politicians,
businessmen and films stars. The names include those of Amitabh Bachchan,
Aishwarya Rai, DLF owner K.P. Singh, Garware family,
Nira Radia, Harish Salve, and Gautam Adani’s elder brother Vinod Adani, to name
a few.29 A year
before that, in February 2015, Indian
Express released the list of 1,195 Indian
account holders and their balances
for the year 2006–07 in HSBC’s Geneva branch, in what has become infamous as
the ‘Swiss Leaks’. The names included several prominent Indian
businessmen—Mukesh Ambani, Anil Ambani, Anand Chand
Burman, Rajan Nanda, Yashovardhan Birla, Chandru Lachhmandas Raheja and
Dattaraj Salgaocar—and the top diamond traders of the country—Russell Mehta,
Anoop Mehta, Saunak Parikh, Chetan
Mehta, Govindbhai Kakadia and Kunal Shah. Even earlier, in April 2014, the
government disclosed to the Supreme Court the names of 26 people who had
accounts in banks in Liechtenstein, as revealed to India
by German authorities—adding three names later.30
The
action so far? HSBC whistleblower Herve Falciani, talking to the media in
November 2015, said the Indian government “had not used information on those
illegally stashing away black money in foreign bank
accounts, and still millions of crores were flowing out”.31
All
this should not be surprising. Despite having come to power on the plank of
anti-corruption and good governance, the Modi Government has actually been
seeking to dilute anti-corruption legislations. Soon after coming to power, it
made a U-turn on the issue of bringing political parties under the Right to
Information (RTI) Act; it had earlier supported this. It has not been keen on
operationalising the Lokpal Act despite it having been notified in the gazette
in January 2014, and has not appointed a Lokpal even after two-and-a-half years
in office, for which it was pulled up by the Supreme Court earlier this year
(2016).
Not
only that, in July 2016, it diluted this Act and exempted bureaucrats from
declaring assets and liabilities of their spouses and dependent children.
Similarly, it has not operationalised the Whistle blowers Protection Act (WBP
Act), despite it too having being passed by Parliament. This Act provides a
mechanism for protecting the identity of whistleblowers—a term given to people
who expose corruption. Nearly 60 people have been killed in the last few years
for exposing corruption and wrongdoing in the government; had the law been
operationalised, the lives of many of them could have been saved.32
Clearly,
all the chest thumping by PM Modi about fighting corruption is just a lot of hot
air.
After coming to power,
the BJP has actually been
diluting anticorruption
legislations.
MODI
CHANGES NARRATIVE TO CASHLESS ECONOMY
The
point we wish to make is that the real purpose of the demonetisation exercise
is not to curb the black economy. Had the government been serious about it, it
could have easily gone after those responsible for generating and storing black
incomes both inside the country and abroad.
This
is also borne out by a recent change in the government tune. On November 8,
when the government issued its first press release announcing demonetisation,
the release spoke extensively on the black money issue, and made no reference
to moving towards a cashless society. PM Modi’s speech, also delivered on the
same day, where he announced the decision to ban Rs 500 and Rs 1,000 notes from
the banking system, also projected that the major focus of demonetization was
war on black money, terror funding and corruption. He too did not make any
major reference to shifting to a cashless economy.
Now,
a month after this so-called ‘war on black money’ was launched, the government
has shifted its rhetoric to pushing for a cashless economy. In his Mann Ki Baat speech
on November 27, Prime Minister Narendra Modi shifted his focus from the drive
against black money to exhorting the people to make the transition first to a
‘less-cash economy’ and then later a ‘cashless’ economy. He urged people to
start using cash substitutes like debit cards and digital wallets. The RBI Governor,
after maintaining a stoic silence on the note ban ever since the decision was
announced, too shared his mann ki baat on the same day, and urged people to
migrate to a cashless society.33 The
government has pushed its departments to shift from cash transactions to
cashless transactions; for instance, the Urban Development Ministry has announced
that people will have to make e-payments in matters of property tax,
professional tax, utilities like water, power & gas, fee and licensing
charges, etc. On December 8, the finance minister announced a slew of
incentives to encourage people to move towards cashless transactions,
including: waiver of service tax on digital payments of less than Rs 2,000;
discounts on petrol and diesel purchases, suburban railway tickets and toll
payments at Toll Plazas on National Highways if payment is made through digital
means; and issuance of ‘Rupay Kisan Cards’ to farmers to enable them to make
digital transactions, as well as installation of two PoS machines (swipe
machines) free in 1 lakh villages with population of less than 10,000.34
The
government is now claiming that as the economy moves towards a cashless
economy, black money will reduce, and tax evasion and corruption will decline.35
But in reality, there is no connection between a cashless
economy and tax evasion and generation of black incomes. Currency notes are not
necessary in generation of black money. Most of the black activities/tax
evasion/ corruption in an economy are indulged in by the rich or the big
corporations. And they use all kinds of Lokayat and
Janata Trust 15 legal accounting gimmicks to do so,
using banking channels. Thus, in the USA, according to the Federal Reserve, as
much as $1.48 trillion is in circulation as cash, which works out to
approximately 8% of its GDP. The cash to GDP ratio of the USA is less than that
of India; according to RBI data, the currency in circulation in India is 12% of
GDP.36 Nevertheless,
hundreds of the biggest US corporations have used all kinds of accounting
gimmicks to show their profits as having being earned by subsidiaries in
offshore tax havens, so as to avoid paying
US taxes. According to one estimate, at least 303 of the Fortune 500 US
corporations collectively hold a whopping $2.4 trillion of profits offshore,
and thus are avoiding paying up to $695 billion in US federal income taxes.37
The
situation in Europe is no different. In the Eurozone countries, cash is 10.63%
of GDP. Yet, tax evasion in Britain every year totals around 16 billion pounds,
while the French Parliament says that tax evasion costs France between 40 and
60 billion euros a year.38
Already,
in India, cashless transactions exceed cash transactions in value terms. At the
end of fiscal 2015, electronic transactions at Rs 92 lakh crore topped
paper-based ones at Rs 85 lakh crore transactions. . .
This
January (2016), 411 million transactions were carried out through various
digital payment modes (including PoS, IMPS, PPI, Mobile Banking and NACH) of a
value of Rs 1.29 lakh crore. By October 2016, this
had risen to 604 million transactions of a value of over Rs 2.48 lakh crore.39
And yet, there are no indications that the black economy has reduced
even marginally, again proving that there is no relation between proportion of
cash transactions in the economy and black money.
Therefore,
the new drive of the Modi Government to further push towards an even more
less-cash economy is not going to lead to a reduction in tax evasion or
reduction in the black economy. On the other hand, instead of cash
transactions, as the number of online transactions increases, it increases the
risk of online frauds. One study found that the value of global online
fraudulent transactions is expected to reach $25.6 billion by 2020, up from
$10.7 billion last year. Just a month
before Modi announced the demonetisation drive, India's biggest internet
banking security breach occurred. Over 3 million debit cards and their pin
numbers were stolen by hackers, enabling the miscreants to steal personal
information and do fraudulent transactions.
Several banks, including State Bank of India, Yes Bank, ICICI Bank and
Axis Bank, were hit by the attack. News reports say that banks have reported
total fraudulent withdrawals of Rs 1.3 crore because of the security breach.
Considering India's huge illiteracy and poverty levels, if the poor are forced
to shift to using debit/credit cards, it is going to be very easy for
tricksters to defraud people of their hard-earned money.40
Making
an economy more
cashless
does not reduce tax
evasion.
Tax evasion in the
US
and Europe totals billions
of
dollars every year.
THE
REAL MOTIVE BEHIND DEMONETISATION
If
demonetisation is not going to lead to a reduction in the black economy—and the
government obviously knows this—then what is the real motive behind the
demonetisation exercise and now the push towards a less-cash economy?
The
real purpose is: to destroy India’s informal economy, especially agriculture,
small-scale retail trade, and small-scale industry. For those who have become
‘Modi bhakts’ because of the media propaganda, this may
sound unbelievable, but all the facts point to this. After coming to power, the BJP has made a
complete U-turn on all the promises made by it during the elections, and is
continuing with the same policies of globalisation–liberalisation–privatisation
that have been implemented in the country for the last more than two decades,
and that too at an accelerated speed. These policies are being implemented at
the behest of the governments of the developed countries led by the USA, and
the international financial institutions controlled by them, the World Bank and
the International Monetary Fund (or IMF). The reason why the Indian
Government is dutifully implementing their dictates is because of our huge
foreign debt, which under the Modi Government has now topped $485 billion.
(Discussing this issue in greater detail is beyond the scope of this booklet.41)
The objective of these economic reforms is to corporatise the Indian economy,
allow big corporations—both foreign and Indian—to acquire decisive control over
it, and remould the economy so that these giant corporations can maximise their
profits. This requires the destruction
of India's vast unorganised or informal sector; and that is precisely what is
being done through the economic reforms being implemented in the country in the
name of globalisation. The three biggest components of India’s vast unorganised
sector are:42
i)
Agricultural sector, on which 53% of the population depend for
their
livelihoods;
ii)
Small-scale or unorganised retail sector, which accounts for around 9% of total
employment;
iii)
Small-scale or unorganised manufacturing sector, which accounts for 7.5% of
total employment.
All
these sectors were already struggling for survival under globalisation. Now, in
the name of demonetisation and cashless economy, the Modi Government has
launched yet another offensive to further cripple these sectors. PM Modi
expecting the pavement tea-seller or a roadside fish-seller to have a PoS
machine with which to accept payment from the credit card of a daily wage
worker, or expecting a street
hawker to sell a dozen bananas and accept payment through Paytm, or expecting a
small farmer to make payment to his labourers by cheques, or expecting the
owners of India’s tiny manufacturing units to pay
their daily wage workers, who are paid daily on a piecemeal basis, by
electronic transfer every day, is akin to Marie Antoinette asking Parisians to
go eat cake.
Benefiting US Corporations
As
with the other important policies being implemented as a part of globalisation,
Washington is behind this policy too! This may sound incredible to our readers,
but there is enough evidence to substantiate this. PM Modi’s demonetisation and
cashless drive is being implemented at the behest of US Government's
development agency USAID.
Ever
since the Modi Government came to power, it has been bowing to US pressure and
implementing policies to benefit US corporations, such as: amending the Land
Acquisition Act (on which the government had
to backtrack due to a countrywide protest movement); diluting India's nuclear
liability law so that US nuclear corporations can set up nuclear plants in
India without having to worry about paying indemnities in case of design
defects causing a nuclear accident; and amending insurance laws to permit
increased inflow of foreign capital into India's insurance sector.43
The push to demonetisation is a continuation of this
surrender to US corporate interests.
In
October 2016, the USAID and the Indian Finance Ministry entered into an agreement
known as Catalyst: Inclusive Cashless
Payment Partnership with the goal of effecting a quantum
leap in cashless payments in India. The partnership was based on a report commissioned
by USAID in 2015, and presented in January 2016, titled Beyond Cash. The study and subsequent plans were kept a
secret44—this
explains Modi's
statement that preparations for demonetisation had been going on for many
months before the November 8 announcement.
The
real aim of PM Modi’s
demonetisation
drive is to benefit
US
digital payments corporations
like
Mastercard, Visa and eBay.
India’s
digital payments market
is
estimated at $500 bn.
Who
are the real beneficiaries of this partnership and drive towards a cashless
economy? This is revealed by USAID itself. In a press release following the
release of the Beyond Cash report,
it declared, “Over 35 key Indian,
American and international organisations have partnered with the Ministry of
Finance and USAID on this initiative.”45 These
organisations are mostly IT companies and payment service providers who stand
to benefit from the increased digital payments and from the associated data
generation. They include Microsoft, credit card companies such as Mastercard
and Visa, the internet services company eBay Inc., the financial services
corporation Citigroup, among others. India’s digital payments industry is
estimated to have the potential of growing to a whopping $500 billion by 2020,
but only if millions of Indians can be drawn into the digital payments net!46
USAID
and its partner corporations are well aware that this policy is going to spell disaster
for India's small
traders
and producers, and people in remote regions; Beyond
Cash had analysed the impact of demonetization
extensively.47 But they
are not bothered. In today's world dominated by big corporations, profit
maximisation is all that matters, even if these profits come drenched in the
blood of lakhs of poor and starving people.
Let
us take a more detailed look at the impact of demonetisation on India’s
unorganised sectors.
Impact on Agriculture
The
majority of the Indian peasants are small farmers with landholdings of less
than one hectare. An important objective of the agricultural reforms being
implemented in the name of globalisation is to slowly strangulate these small
farmers and drive them out of their lands so that big agribusiness corporations
can take them over. And so successive governments have been reducing public investment
in agriculture, cutting subsidies given on major inputs needed for agriculture
(such as fertiliser, electricity and irrigation subsidies), gradually
eliminating output support to agriculture (in the form of public procurement of
agricultural produce), gradually phasing out subsidised credit given to
agriculture by public sector banks, and allowing imports of heavily subsidised
agricultural produce from the developed countries into India. These policies
have pushed Indian agriculture into deep crisis, and driven the hardy Indian
farmers into such
despair that more than 3 lakh farmers have committed suicide since the reforms
began, the largest recorded wave of such deaths in history.48 The Modi
Government’s policies of the last two years has further worsened
this crisis. It has cut budgetary allocations for agriculture related sectors,
from 1.07% of GDP in 2014–15 BE to just 0.92% of GDP in 2016–17 BE—for a sector
on which over half the population depend for their
livelihoods.49 Consequently,
farmers’ suicides in 2015 recorded a 40% increase over the figure for 2014!50
Now,
demonetisation is probably going to be the proverbial last nail in the coffin
of the small farmers. It was announced just when the kharif crop was being
harvested and sowing for the rabi crop was about to begin.
This has pushed farmers into a difficult situation. Business at the mandis is
down, by anywhere from 25% to 70%, as there are no buyers— the cash crunch has
affected shopkeepers, hotels and restaurants, and even
the small street vendors. And so, traders at the mandis do not have cash to pay
to the farmers for their produce (or they are forcing farmers to sell at half
the price); even if they pay in cheque, farmers are not able to encash them as
banks are facing a cash crunch. The other source of funding for farmers,
disbursal of loans by village-level credit cooperative societies, has also been
affected due to restrictions imposed by the RBI on these institutions. And so,
farmers do not have the money to buy seeds and fertilisers, and to hire
tractors and other equipment, and pay their labourers—and they need cash
immediately, because the agricultural
season does not wait upon humans. The extent to which the rabi crop is going to
be affected is evident from one newsreport, according to which the disbursal of
crop loans in Maharashtra has been badly hit. By November end, only 17% of the
earmarked outlay had been disbursed, despite the fact that this year, the water
situation is satisfactory across the state due to the good monsoon after two
years of weak monsoons.51
Impact on Small-Scale Retail
Another
important policy reform that is being pushed through under globalisation is
allowing entry of giant multinational retailers into India’s retail sector,
which is overwhelmingly dominated by small-scale retailers.
In September 2013, the then UPA Government granted approval to 51% foreign
direct investment (FDI) in multi-brand retail.
The entry of huge foreign retail corporations like Walmart, TESCO, Carrefour
and Metro into India’s retail sector will decimate India’s small retailers.
That is because these foreign retail giants are huge, much beyond our
imagination: for instance, in 2009–10, Walmart alone had total global sales of
$405 billion, meaning that Walmart alone sold more goods than all of India’s
1.5 crore retailers combined! These big retailers have the financial muscle to source
their supplies from the lowest cost producers at the global level, like China.
Therefore, they will be able to sell their products at cheaper rates than the
small retailers—if necessary, they will even sell at a loss. Not just the kirana stores and street vendors
will be forced out of business, the entire network of wholesalers and
distributors will be displaced. There is absolutely no exaggeration in this, it
is happening all over the world. Small retail has virtually been wiped out in
the developed countries. And it is in the process of being wiped out in those developing
countries who have opened up their economies to these giant retailers.52
Demonetisation
is decimating India’s
informal
sector, on which 92% of the
people
depend for their livelihoods.
When
it was in the opposition, the BJP had vociferously opposed the opening up of
the retail sector to FDI. However, after coming to power, it has made a
complete U-turn on this issue. At a news conference at the BJP party
headquarters on May 23, 2015, Finance Minister Arun Jaitley formally declared
that the BJP was continuing with the UPA policy of allowing FDI in multi-brand
retail. Not only that, since then the BJP has further liberalised this sector.
It has permitted 100% FDI in the market place format of e-commerce; it has
waived the 30% local sourcing norm imposed on single brand retailers for companies
with ‘cutting-edge technology’, a move that will benefit companies like Apple;
it has also allowed 100% FDI in trading of food products
produced in India, including through e-commerce.53
India’s
small-scale retail was already under severe attack; demonetisation and the push
towards a cashless economy is going to sound the death knell for it. India has
more than 1.49 crore retail outlets, the highest in the world. India’s retail
sector is presently overwhelmingly dominated by small retailers. According to
the Confederation of All India Traders—one of the largest trade associations in
India—businesses in markets across the country has reduced by a whopping 75%
since the government announced demonetisation on November 8. People simply
don’t have the cash to buy even essentials, and even if they have cash, it is a
Rs 2,000 note that most small traders cannot accept as they do not have enough
change.54
Impact on Unorganised Manufacturing Sector
Since
India began globalisation in 1991, despite the massive entry of giant Western
corporations into the economy, and despite the Indian economy having expanded
at a rapid rate of 7.3% per annum during the decade
2000–10, it has not led to a generation of formal or organized sector
manufacturing jobs. Two decades later, the total manufacturing sector employment
in India in 2010 was only 50.7 million, or 11% of the total workforce; of this,
barely 16 million were organised sector jobs, the remaining 34.5 million were
unorganised sector jobs—that is, jobs in tiny units or home-based manufacturing
(this includes jobs such as workers making papads or rolling bidis in their
homes).55
Even
though the overwhelming number of jobs in the manufacturing sector continue to
be in the unorganised sector, for the last two decades, this sector has been
struggling for survival due to globalisation policies such as ending of
reservations for small units and decline of low interest bank credit for the
small sector.
Now,
demonetisation is destroying this sector. As many as 80% of the micro/small
enterprises in the country have been badly hit. They are very small units, and
have innumerable backward and forward linkages, all of which are in cash. The
drying up of cash has pushed these industries to the wall. To give an example,
take the brass industry of Moradabad, Uttar Pradesh. The raw material for brass
is supplied by people
who deal in scrap. They buy scrap from various places in cash, and sell it to
the consolidator who buys it in cash. The next stage is the melting of scrap;
it is turned into brass slab or bar. After that comes the making of moulds—for
instance, of a flower vase or a tap. The brass is melted and poured into these
moulds. After this stage, there are craftsmen who make designs on it, then
comes the stage of polishing, then
of lacquering. Each of these stages is based exclusively on cash. At each
stage, the workers are paid in cash, daily, on a piecemeal basis. They earn, and spend it, on a daily basis.
Demonetisation and the resulting cash crunch has brought this thriving
industry, which had a total turnover of Rs 6,000 crore, to a standstill.
Likewise, the hosiery industry of Ludhiana, the bangle industry of Faridabad,
the garment industry of Tirupur, the chikankari industry of Lucknow, and so
many other industries, employing lakhs of workers, have also been badly affected;
thousands of units have shut down, lakhs of workers have been rendered
unemployed, and forced to go back to their villages.56
Economy Slowing Down
The
destructive effect of demonetisation on the informal sector has caused demand
to fall, production to decline in several sectors, and rise in unemployment.
The money supply is not going to be restored for several months, implying that
these adverse effects are going to continue for a year and more. The obvious
consequence: recession. The first authoritative figures indicating that
demonetisation is leading to a slowdown in the economy have started coming in
within just one month of the November 8 announcement of the banning of Rs 1,000
and Rs 500 notes. The Nikkei/Markit
Manufacturing Purchasing Managers' Index, one of the most closely watched
economic indicators in the world, for India fell to 49.6 in December from
November's 52.3. It was also the biggest month-on-month decline since November
2008, just after the
collapse
of Lehman Brothers triggered a financial crisis and brought on a global
recession.57
MODI
GOVT:
MOST PRO-RICH, ANTI-PEOPLE
Just
like his other slogans such as Make
in India and Skill
India, PM Narendra Modi has covered his
demonetisation policy and drive towards a cashless economy too with a coat of
nationalism. With the corporate controlled media firmly backing him, the BJP
‘indoctrination’ machinery has launched a huge propaganda campaign calling it a
‘surgical strike’ against black money and terrorism, while labelling those criticising
the government decision as being anti-development and hoarders of black money,
and even anti-national. Despite having to stand in queues for hours to withdraw
their own money—and that too only in limited amounts in Rs 2,000 notes—for more
than 40 days now, despite the mounting evidence that demonetisation is having
ruinous consequences for agriculture, retail trade and small businesses, and
has destroyed
the livelihood of lakhs of people, a large number of people have been befooled
by the propaganda and continue to believe that demonetisation is indeed going
to curb the black economy and that finally, achhe
din are around the corner. The media has been so successful about
creating an aura of saintliness about Modi that people have forgotten their
life realities. The reality is that the Modi Government is even more
pro-corporate and anti-poor than the previous UPA Government. Over the last
two-and-a half years it has been in power, it has drastically cut government
welfare expenditures on the poor, while transferring lakhs of crores of rupees
of public funds to the coffers of the rich under various guises.
Government Transfers to the Rich
- Union Budget documents reveal that
successive governments at the Centre have been giving tax exemptions to the
rich to the tune of lakhs of crores of rupees every year. These tax exemptions
have reached a new high under the Modi Government. In 2014–15, the Modi
Government gave away Rs 5.49 lakh crore in tax exemptions/ deductions/
incentives to the very rich; in 2015–16, Lokayat and
Janata Trust 23 these tax exemptions touched Rs 5.51
lakh crore!58
- Ordinary people defaulting on bank loans
have their house/scooter/ other assets seized, and farmers are driven to
suicide for not being able to pay the instalments on their bank loans. But when
the wealthy default on their (public sector) bank loans, nothing happens to them.
The banks simply write-off their loans! The Minister of State for Finance
recently admitted in the Rajya Sabha that during the first two years of the
Modi Government, public sector banks have written off loans given to the rich
to the tune of Rs 1.05 lakh crore.59
- Loan write-offs, however, make bad news,
both for corporate houses and banks/government. So public sector banks are adopting
a new stratagem to provide succour to these ‘helpless’ rich—they ‘restructure’
their loans. That’s the buzzword today, ‘Corporate Debt Restructuring’ (CDR).
Under its name, the payback period may be extended, interest may be waived,
and/or a part of the loan may be converted into equity; the corporation is even
given another loan to tide over its ‘crisis’. Private corporations whose loans
have been approved for restructuring include some of India’s most well-known
names. Public sector banks had cumulatively rescheduled/ restructured loans
worth Rs 4.03 lakh crore under the CDR scheme till March 2015.60
While we do not have figures of the amount of loans
restructured under the Modi–Jaitley regime, all indications are that this legal
transfer of public funds to the corporate houses in the name of ‘loan restructuring’
is gathering speed under the new government.
While on the one hand the bad loans of Indian banks have gone up to Rs 6
lakh crore (90% of which is on the books of public sector banks), at the same
time, in June 2016, the Reserve Bank of India relaxed guidelines for
restructuring bad loans of large borrowers so that banks can restructure them
more easily.61
- Another ‘innovative’ way in which public
funds are being transferred to the private sector is under the guise of what is
being called ‘Public–Private–Partnership’. Under this, the government invites
the private sector to invest in infrastructure, provides the private investor a
direct subsidy of up to 40% of the project cost, gives it land and other
resources at concessional rates, guarantees the private partner a minimum rate
of return on its investment, Modi Govt. gave tax
exemption of Rs 11 lakh crore to the super-rich during its first two years in
office. 24 Demonetisation: Yet Another Fraud on
the People and as if this was not enough, even the
investment money is also often provided by the government in the form of long
term loans at concessional rates. (And yet it is called free market
capitalism!) In his Union Budget 2016–17, Finance Minister Jaitley allocated Rs
55,000 crore for construction of roads and highways in partnership with the
private sector under the PPP model— implying that this is the amount that is
going to be given as subsidy to the private sector to build roads and highways
in this financial year. Last year, the amount transferred to private corporations
under this head was Rs 43,000 crore.62
These
are just a few examples of the mindboggling amounts of public funds being
transferred to the private corporate houses under the Modi regime under various
guises. And on the other hand, the BJP Government in its three budgets
presented so far has made steep cuts in government spending on welfare schemes
meant to provide essential services like education and health to the poor at
affordable rates and in its allocations for the most marginalised sections of
the Indian society.
Withdrawal of Subsidies to the Poor
- In
a country where more than 40% of the children drop out of school without
completing elementary education;63 where
even for those going to school, the condition of the schools is so pathetic and
quality of education is so bad that 52% of Class V students are unable to read
Class II–level text and 49% cannot solve simple two-digit subtraction problems
(that they are expected to learn in Class II);64 an
unconcerned Modi Government has slashed the school education budget so severely
that the budget allocation for 2016–17 is lower than 2014–15 BE by as much as
32% (in real terms)!65
- India
is the disease capital of the world. More than 2 lakh people in the country die
of malaria every year, while TB kills 3 lakh. India accounts for nearly
one-fourth of the deaths in the world due to diarrhoea, more than one-third of
the deaths due to leprosy and more than half of the deaths due to Japanese encephalitis.
India’s under-five child mortality rate is the highest in the world, and it
accounts for one-fifth of the global maternal deaths too. India is also in the
grip of an epidemic of chronic diseases, which account for more than 50% of the
deaths in the country. This “crisis” gripping India’s health system is because
of low public expenditure on health, due to which the country’s public health system
is in a bad shape, and hence the people have to depend on the private sector
for treatment—and obviously, only the rich are able to afford good quality
health care in costly private hospitals. This crisis can be tackled, the
solution being to raise India’s public expenditure on health care—India’s public
health spending is amongst the lowest in the world, with the country ranking
171 out of 175 countries in this.66 However,
Finance Minister Jaitley in his latest 2016–17 budget has kept the budget
allocation for health at the same level as two years ago, which implies a cut
in real terms by around 13% (taking inflation at 8% for both the years).67
- India
is one of the world’s worst places to be a woman. She may be killed even before
being born, or as an infant or a little girl. If she survives, there is every
possibility that as she grows up, she may be molested/raped/tortured by her
husband. In India, a crime against a woman is committed every 100 seconds: a
woman is molested every 7 minutes, raped every 15 minutes, a case of cruelty
committed by either the husband or his relatives occurs every 5 minutes, and a
dowry death occurs every 65 minutes (all figures for 2013).68
And
yet, the Modi Government’s allocation for the Gender Budget (this captures the
quantum of budgetary resources earmarked for women by various departments and ministries)
for 2016–17 is lower than that for 2014–15 even in nominal terms by 7.6%.69
Modi Govt. has cut the budget
for education by 32%, for health
by 13%, gender budget by 20%
and allocation for SCs/STs by 35%
in 2016-17 BE as compared
to 2014-15 BE (in real terms).
- More
than six decades after the Constitution outlawed the practice of untouchability
and discrimination on the basis of caste, and guaranteed that every citizen
shall have equality of status and opportunity, the scheduled castes and
scheduled tribes continue to face many forms of untouchability practices as
well as social, economic and institutional deprivations. Not only that, they
are also subjected to enormous atrocities, ranging from abuse on caste name,
murders, rapes, arson, social and economic boycotts, to naked parading of SC/ST
women, and being forced to drink urine and eat human excreta. And so the
government in the 1970s launched the Scheduled Caste Sub Plan (SCSP) and Tribal
Sub Plan (TSP) to ensure the flow of targeted funds from the general sectors in
the Central Ministries towards the development of the
Dalits and Adivasis. The guidelines under these two
programmes clearly state that the allocations for them as a proportion of the Plan
outlay should be at least in proportion to their share in the total population.
The population share for the Dalits is 16.6% and for Adivasis is 8.6%. However,
the Manuwadi BJP
Government’s budget allocations for SCSP and TSP in 2016–17 are even in nominal
terms lower than the allocations made in 2014–15 BE by as much as 23–26%.
Consequently, the allocation for SCSP has fallen to just 7.06% and the
allocation for TSP to a lowly 4.36% of the total Plan expenditure for 2016–17.70
There
is no doubt. While one may have strong disagreements with the overall
orientation and policy framework of the various governments that have come to
power at the Centre since Independence, the present BJP Government led by
Narendra Modi is undoubtedly the most anti-people of them all.
LOKAYAT
Contact Phones: Website and E-mail:
Neeraj
Jain 94222 20311 www.lokayat.org.in
Ajit
Penter 94235 86330 lokayat.india@gmail.com
Contact Address:
Lokayat,
Opp. Syndicate Bank, Law College Road, Near Nalstop,
Pune
– 4.
(We meet every Sunday from 5 to 7 pm at this
address.)
