Fri. Mar 29th, 2024

Since the report issued by the RBI of the figures regarding the old currency returned to the banking system after the Narendra Modi declared the old notes of Rs 500 and 1000 as invalid the opposition is in a revolting mode to attack the government.

The opposition has been criticising the government ever since demonetization was announced by Prime minister Narendra Modi on Nov 8, 2016. After the RBI issued its first report stating the figures after the ban in use of old currency of Rs 500 and 1000, the opposition party has got another chance to attack the government. According to them the entire exercise of demonetization is a flop show and did not get back the black money that Modi had claimed to eradicate from the economic system of India.

Former Finance Minister P Chidambaram, in a special interview with India Today’s Consulting Editor Rajdeep Sardesai, completely rejected the claim of the central government that demonetisation was successful. He also completely denied the statement given by the central government that the basic purpose of the ban was to promote the cashless economy in the country.

India Today’s consulting editor said that the Reserve Bank’s report and the data provided on the note ban has raised political upheaval and Chidambaram was amongst one of the opposition leaders to raise the voice against the government on demonetisation through a series of tweets. He had said that the note ban was a curse for the Indian economy whose bad effects will continue to remain in the system. Rajdeep questioned him that the opposition claimed that they have proof of the failure of demonetisation and Chidambaram also attacked the government over this, is this all just because he belonged to the opposition or did he have any real data to support his claim?

Responding to this question the former Finance Minister said that he just did not rigidly put up statements against the government. His claim of declaring demonetisation a failure was on the basis of facts and figures. He further added that according to the facts the three objectives given by Prime Minister behind the note ban are entirely contradicting the results.

Chidambaram replied to the question that why did he use such provoking words in his tweet, saying that all the words used in his tweet were true and were based on facts.

When the reporter questioned that why his attitude towards demonetisation was so pessimistic when the government is confident and positive about this step and said that the ban on note should not just be regarded as an attempt to accumulate money in banks. He replied that this purpose was decided by the government itself and it was one of the three objectives also. He further reminded that then the Attorney General told the Supreme Court that the government feels if 4-5 lakh crore will not come back to the Reserve Bank than this will benefit the government.

The reporter said that Rajiv Kumar, newly appointed Deputy Chairman of the Policy Commission, has said that attention should not be focused on the fact that black money flowed or not, but consider its repository. The government has attacked the black money bog in the system. Kumar said that unlike Chidambaram’s thinking that black money has turned white, the truth is that black money is now grayed out and income tax departments and ED can easily target it. Responding to this Chidambaram said that “I do not want to comment on a person who has just been appointed recently. Three days after assuming his office, the government rejected the report of the Commission. The purpose of the government was to hurt the black money reserves. But the fact is that we always say that no ban on this store will not be hurt by the ban on bondage but rather the black money will arise. This will only hurt the reserves of 3-4 lakh crores which have not been in the system. But this means that anyone who has black money will find a way to convert it into white money. That’s why I continued to question this. It seems that it was brought to help those who convert black money into white money.”

When the reporter said that the government claims that after demonetisation the government now have the records of all those people who possess black money and can take actions against them, Chidambaram cross questioned that the government claims that black money worth Rs 16,000 crore has been identified and the cash of about Rs 1,000 crore has been seized. If these figures are compared to the records of the income tax department of previous years, it is almost the same. Every year, the Income Tax Department indicates that it has detected such thousands of unaccounted income and seized 500-1000 crore, so what new the government has achieved, this was done by the IT department also every year without declaring any currency note as invalid?

Not only this, these figures are not the last. Even after this, people get an opportunity to appeal. It is only after the final verdict in these appeals, it can be decided that how much money deposited in the IT department is tax and how much is black money. No conclusions can be reached on the basis of the seizure of income tax department and the IT has been claiming such figures from past 10 years Chidambaram said.

When questioned whether he does not accept the government’s logic that account holders can now be identified and about Rs 3 lakh crore account holders are under investigation, he replied that such account holders have always been under investigation. When he has started Cash Transaction Tax, it was also with the intention that the people who deposit or withdraw cash can be monitored. Many people were found having black money and actions were taken against them.  He further added that there were several ways to monitor people, but claiming that demonetization was the only way was totally wrong.

Talking about government’s claim to eradicating counterfeit money from the economy through demonetisation Chidambaram said that most countries try to deal with fake notes by changing their designs in every two or three years. For this, new features are included in the notes and old ones are declared invalid. It has been done earlier and should be adopted in the future also. But no government implements demonetisation to deal with fake currency and even if the government claims that it has dealt with the issue of counterfeit notes, there are new fake notes of Rs 2000 circulating in the market, what does the government have to say about that he questioned?

The India Today reporter pointed out government’s claim that demonetisation has also helped to some extent in reducing the funds given to the terrorists and the Naxalist incidents have also reduced as the funds provided were stopped to some limit after the note ban. Regarding this Chidambaram said that, if talking about the facts and figures of Kashmir where terrorism and terror funding is at its peak, then the death rate in 2007 was much higher than that in 2016. So according to these data, the objective of curbing terror funding through demonetisation has completely failed he said.

Former Finance Minister further added that the Naxalite incidents have come down from the year 2009. and this decline is continuing because this government is operating on the policies of the previous government. He said that he does not have a problem with the current government using the policies of the previous government instead he appreciate it.

Chidambaram further questioned that the government claims that after the note ban, cashless transaction, digitalisation of the economy and digital transaction has increased by 20 percent, but was this the real aim of demonetisation.

When questioned that if he is blaming the government for changing the objectives of demonetisation when the results were not as expected, Chidambaram replied that according to the figures, in November 2016, non-cash or electronic payments amounted to Rs 94 lakh crore. In May 2017, six months after the ban, it stood at Rs 94.21 lakh crore. Hence there is no evidence that there was a very sharp jump in cashless transactions. Even now the main mode of transactions in this country is cash. Growing digital transaction is a good thing and even he supports it, but before saying that demonetisation has encouraged digital transactions, the fact that millions of people stood in long ques outside the banks and ATMs in heat and rain should also be considered. He added that 104 people lost their lives and many medium and small size business were shut down and around 15 lakh people lost their jobs due to the note ban ruining many lives completely. He further questioned the government that the economy’s GDP growth has fallen down to 5-6% from the earlier rate of 6-7%, does the government still believe that the answer to all these crises is digitization?

The reporter pointed out that in spite of the step of demonetisation taken by the government, in view of the political considerations, even after paying all the social, economic and human costs people are supporting BJP as it has won all the elections contested after Nov 2016. To this Chidambaram replied that the elections of five states were held at the same time (in March). In Uttar Pradesh, BJP got a huge victory. So it was concluded that people had voted in support of the demonetization. But at the same time the people of Punjab turned down the BJP badly so does this means that people of Punjab were against the note ban, he questioned.  People in Goa and Manipur pushed the BJP to second place. So as per the facts does it mean that only half the people supported demonetisation and half were against it? He said that all these logics are based on simple conclusions but the election of any state is not fought on these logics. Apart from its impact on the economy, no other comparison can conclude whether the effects of demonetisation was good or bad he added.

Rajdeep Sardesai during the interview underlined the efforts of the current government to eradicate black money from the system said that At least the BJP-Led NDA government is taking some steps to keep up its promise of removing black money, unlike the Congress-led UPA government, which did not do anything. Reacting to this Chidambaram said that there is still the same Income Tax Department. Former Director is now the Chief Vigilance Commissioner. He added that the government should bring out all figures from the year 1999 till no with all details of the government income tax department’s impressions, seizure, unaccounted income, how many cases were prosecuted, how much tax was imposed, and all of them. After comparing the figures it will be noticed that for all these years nothing much has changed and the data almost remains to be the same.

When questioned about what according to him is the solution, he said that the economic and tax structure of India is very unique. Nearly half of our population has legitimate income not falling under the tax system like farmers, religious institutions, religious trusts, charities, people living in the northeast, tribal etc. Along with this, a large population is also legally paying tax. As long as it is a dual-structure economy, money from one structure to the other will continue to flow. For example, a note of 2000 goes from one hand to the other hand 20 times a day, it can be white or black money. Therefore, the solution is to encourage more people to pay tax at lower rates of tax.

Chidambaram said that like he had done back in 2007, the experiment should be taken forward for twenty years. He said that if the tax rates are reduced and if the tax administration is more friendly, people are encouraged to pay tax and file returns. He further suggested that apart from this, cash transaction tax, reporting of suspicious transactions, third party reporting etc. are the means for monitoring transactions. He added that the government should consider other means and that note banning is not the solution.

The reporter questioned that according to the government the rate of people filing income tax has increased a lot after demonetization, what is the view of Chidambaram, regarding this? To this, the former finance minister replied that the tax base has increased every year in the last 15 years and there has been a slight increase in the tax base this year, but the average taxable income in the returns filed is only 2.7 lakh, which is slightly more than the tax exempt scope. Therefore, the income tax filed by the tax payers is very low.

Sardesai also pointed out that the government is also claiming that the ban on black money has been curbed in important areas like real estate and the Finance Minister has said that the next target of the government is political funding. Responding to this Chidambaram replied that it does not matter to them if the political funding is stopped. He attacked the BJP government said that in fact in the past three years, BJP has got the highest funding of Rs 707 crore. If the government is now aiming at curbing the political funding there is nothing wrong in that. There are many other sectors of the economy in which black money grows and the government should focus on them too such as in the construction sector, film industry, capitation fees in educational institutions, corruption in the administration, political funding etc. He also questioned the government that can it give the proof that all the funds used for rallies done by political parties are done by check and black money is not used, how will the government eradicate and clean such a huge web?

Rajdeep Sardesai questioned that according to Chidambaram who actually is responsible for all this, is it the Governor of the Reserve bank of India or the economic chief advisor of the government. Clearly holding the Governor responsible for this Chidambaram said that “I do not think the Chief Economic Advisor had advised or supported the note ban. After getting a letter on November 7, the governor of the Reserve Bank acted promptly and suggested demonetisation on 8th November. According to me, they should not have done this and I hope they have learned a lesson from it.” Though he did not talk much about the letter received by the Governor on 7 Nov.

Concluding the exclusive interview the reported asked the final question that Manmohan Singh had called the entire exercise of demonetisation a group robbery and theft, what are the views of Chidambaram on this? Chidambaram said that the former Prime minister had called it unprecedented mismanagement and that is exactly what happened and it has also been proven. When it seems that every person holding a black money converts it to white, then it is called a loot in the economical language, he said.