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Demonetisation Anniversary updates: Govt now wants to eat into RBI’s reserves, seeks to step up expenditure in election year

Demonetisation Anniversary LATEST updates: Congress leader and former finance minister P Chidambaram on Thursday called demonetisation an “ingeniously designed official money laundering scheme”. The Modi govt is staring at a fiscal deficit crisis. It longer talks about ‘achhe din’ or growth and development. We only hear about the Hindutva agenda. The talking and writing are only about the divisive issue, said Chidambaram. The promise of ‘acche din’ lies in shambles. People will take a decision when given opportunity and the Karnataka bypolls were a testimony to the same, he said.

Chidambaram said that demonetisation has not put an end to fake money and now the govt wants to use RBI reserves to step up expenditure in an election year. The government doesn’t know what the consequences will be if the RBI defies it or if the RBI Governor resigns. Either way, it will be a catastrophic situation, he said.

File image of Congress leader P Chidambaram. PTI

File image of Congress leader P Chidambaram. PTI

Continuing their war of words on social media, BJP in a series of tweets asked why is Congress always joining protests on anti-corruption measures. “Why is it that whenever India’s standing in the world increases the Congress takes to defaming India and creating an atmosphere of gloom to mislead the people?”

In a blunt tweet to the Congress, BJP asked, “Can the Congress name even one stringent measure they took during the UPA regime, which was aimed at eliminating corruption and black money?”

The tweet was part of 10 questions posed by the ruling party after the Congress announced nationwide protests marking the 2nd anniversary of demonetisation.

Slamming former finance minister P Chidambaram, who earlier on Monday criticised Arun Jaitley for saying “confiscation of currency was not an objective of demonetisation”, BJP said that he had no right to speak on policy matters.

“How is a former Finance Minister, himself under radar of investigating agencies for massive corruption involving land, cash and foreign bank accounts, speaking on policy matters? With what face?”

Chidambaram, earlier today, had tweeted, “FM says “Confiscation of currency was not an objective of demonetisation”. Will someone please remind him of what he told the media and what the AG told the Supreme Court?”

Posing ten questions to the Congress, the BJP asked why does the party fear demonetisation. “Why does Congress find merit in protesting against every anti-corruption measure of the Government of India? What do they fear?” In a series of tweets, BJP slammed Congress and the opposition for protesting against “anti-corrupt” measures.

Former finance minister P Chidambaram will address the media in Kolkata on demonetisation at 2.15 pm on Thursday, sources said.

DMK chief MK Stalin has also attacked the Modi govt for demonetisation saying that it ‘brought people on streets’. Meanwhile, Shashi Tharoor says ‘nation’s economy has burned’ due to demonetisation. He has joined the list of Opposition leaders who have criticised the government heavily on the second anniversary of demonetisation.

“India after 2-years of demonetisation has witnessed a massive change in the way Indians transact their money, as millions have adopted digital methods and technologies for payments of goods and services. Demonetisation has caused significant disruption, but this incident also paved the way for digital payments play in India. It has eased the transition of millions of Indians into the formal banking system and given them access to credit and loans that can help them achieve their goals in future,” Ramaswamy Venkatachalam, Regional Manager-India and South Asia, Fidelity Information System (FIS) told Firstpost.

Aam Aadmi Party (AAP) convener and Delhi chief minister Arvind Kejriwal on Thursday questioned the rationale behind the Modi government’s note ban move and termed it as “a self-inflicted deep wound” on the Indian economy.

Arun Jaitley, in his blog, wrote that “an ill-informed criticism” of the demonetisation is that almost the entire cash money got deposited in the banks. However, he wrote, that “confiscation of currency was not an objective of demonetisation”. “Getting it into the formal economy and making the holders pay tax was the broader objective,” Jaitley said. He added that the impact of demonetisation has been felt on the collection of personal income tax and the move of government has led to financial inclusion which in turn has ensured that even weaker sections became part of the formal economy.

Former prime minister Manmohan Singh has called the note ban an ‘ill-fated and ill-thought of exercise. Singh said its ‘wounds’ are becoming more visible with each passing day. “I urge the government to restore certainty and visibility in economic policies. Today is a day to remember how economic misadventures can roil the nation for a long time and understand that economic policymaking should be handled with thought and care, Singh said in his statement

However, it is unfair only to look at the negatives of demonetisation. Regardless of the tangible results, this was the biggest crackdown on parallel economy modern India ever witnessed and no one doubts the intention of the exercise. Without a doubt, this led to the creation of a more formalised economy. Most of the money in circulation can be now raced to the sources and taxmen have a better grip on those who have deposited illicit money in their bank accounts.

The RBI had only a secondary role to play throughout the demonetisation episode. While its role in deciding the launch of demonetisation was understandably limited, the unenviable task of implementing the programme was completely entrusted with the RBI. This wasn’t easy for the central bank. Several circulars were issued and rolled back. Most of the decisions were taken on the go. The huge public unrest that followed in the later months on account of mega problems in depositing and withdrawing money put the regulator, and the banking system as a whole, in a spot. The mayhem continued for a long time. Those who criticised the central bank heavily for its handling of note ban included former RBI governor, YV Reddy, and one of the former deputy governors, Usha Thorat. They cited the reputation loss RBI, as an institution, suffered throughout the whole episode.

The biggest achievement of demonetisation is the mainstreaming of the economy with GST adding weight to it back-to-back and crooks caught with their pants down. The collection of GST on the back of demonetisation has also gone up crossing the Rs 1 lakh crore mark per month many times over. Direct taxes collection too have gone up.

Two years ago, Narendra Modi launched demonetisation with three objectives to begin with–terminating black money in cash, killing fake currency and put an end to cash-based corruption. The objectives were noble and welcome in an economy where a parallel economy was thriving. The operation itself was unheard in such a scale in any comparable economy. About 86 percent of the cash in circulation vanished in one go when Rs 500, Rs 1000 notes were declared invalid. Till date, there is no hard evidence that demonetisation achieved any of the three initially stated objectives in the desired manner.

What suffered worst during the attack on cash was the cash-intensive industries and SME, MSMEs. When cash significantly disappeared from the system for a good 3-4 months, supply chains were taken a major hit. Things improved when cash returned to the system but many failed to survive. Reports emerged of several micro-units shutting shops which inevitably meant job losses and, in turn, demand slowdown.

Asking Prime Minister Narendra Modi to apologise to the nation for demonetisation that “wrecked” the economy, the Congress on Tuesday said it will observe a nationwide protest on Friday to mark the second anniversary of the note ban.

“Two years ago the Prime Minister announced demonetisation and gave three reasons for it – to curb black money, weed out fake notes and proscribe terror funding. Two years later, none of those objectives has materialised. “In fact, there is more cash in circulation today than it was two years ago when Modi announced demonetisation,” Congress spokesperson Manish Tewari told the media here.

The Congress leader said that Modi should apologise to the people of India on 8 November (on the second anniversary) for his “Tughlaqian decree” of demonetising Rs 1,000 and Rs 500 notes, then in circulation.

“The Prime Minister should apologise to the nation on 8 November 2018, at same time for ruining and wrecking the Indian economy,” said Tewari, adding that Congress leaders and workers will come out on the streets across the nation in protest against the “complete demolition of the Indian economy by this Tughlaqian decree of demonetisation”.

Congress president Rahul Gandhi has time and again slammed Modi government’s demonetisation move and the introduction of the Goods and Services Tax. Rahul had who referred to GST as Gabbar Singh Tax, said the government has destroyed the country’s economy with decisions like these.

Updated Date: Nov 08, 2018 17:59 PM

Updated: November 9, 2018 — 3:33 am