When PM Narendra Modi announced on November 8, 2016 that in a serious and bold effort to curb the menace of black money, five hundred and thousand rupee notes would no longer be of any value after four hours, the citizens and the political class were both taken aback. Parties like TMC, SP, AAP and BSP wasted no time to call this move a draconian one that would affect the common man and the unorganized economy that mainly runs on cash. Parties like the JDU, TDP and the BJD were supportive of this bold move and Nitish Kumar went up to the extent of saying that PM Modi is bravely riding a tiger. Among the journalists, Arnab Goswami, who was with Times Now then was a vocal supporter of this move, while Rajdeep Sardesai, Sagarika Ghose and Barkha Dutt were strongly opposed to demonetization. There was a third set of people who were fence sitting. This included the Congress, who at first supported the move in principle but was wary of its consequences. As the days passed, they became critical of the move with accidental ex-PM Manmohan Singh terming it organized loot and legalized plunder.
Despite the mainstream media burning the midnight oil and putting a lot of effort in creating false and highly exaggerated reports of people dying in queues, the move was a big hit among the people of the country. This can be vindicated by the various elections that followed the demonetization. BJP put on a stupendous performance in the states of UP and Uttarakhand and also managed to win the local body elections in Maharashtra, Delhi and also made deep inroads in Odisha.
The other big long awaited reform that came into practice during the current NDA regime was the Goods and Service Tax (GST). GST, which was first spoken about by P Chidambaram, the scam tainted finance minister during the UPA regime, in 2006, had languished in parliament for twelve long years. Despite the GST Bill being passed in the Lok Sabha in 2014, it took three more years for the GST to come into effect because of partisan politics played by the opposition parties. Finally, on July 1st 2017, GST became a reality. The GST is expected to boost the GDP of our country significantly and more importantly, will play a big role in getting the Small and Medium Enterprises (SME) into the mainstream and prevent tax evasion.
Both these moves that came into effect with only a few months between them are supposed to cause short term disruptions and are supposed to eventually benefit the country in the long run. The exact same thing was highlighted by BJD MP Jay Panda in an article in Times of India.
Those opposed to PM Modi have latched on to two recent things: one is the announcement by RBI that out of 16 lakh crore rupees of demonetized currency, around 90% of them have made it to the banks and thereby they term demonetization as a failure. The other is sharp contraction in the GDP growth figures, whereby the GDP growth rate is 5.7%. In his article, Jay Panda explains that people having hoards of illegal cash have misused the Jan Dhan accounts to get the money laundered back to the system and RBI kept changing the KYC norms to tackle such people.
If 90% of the demonetized currency has come back to the system, does it mean that there was no or hardly any black money in the form of cash in India?
Anyone who has an idea of how the real estate sector functions will know that there are many crores of black money in the form of cash that is generated on a daily basis. Undervaluation of property is almost a norm in every part of India and every builder takes in a percentage of the total money in the form of cash to avoid paying capital gain tax. Fifteen lakh crore rupees of money getting into the banking system does not mean that it is all legitimate as mentioned by our Harvard educated ex FM Chidambaram, who opines that demonetization was a method to convert black money to white. Demonetization was the first step towards cleaning up a rotten system, a system that has remained rotten for far too long with no politician having the intent to clean it up. The Congress, during all its years of rule never took any initiative to clean up black money prevalent in the system and now is going hammer and tongs to criticize the move. Jay Panda goes on to explain that there has been a surge in MNREGA after an initial dip, thereby indicating that things are returning to normal as far as demonetization is concerned.
Coming to GST, Jay Panda mentions that GST would be a tectonic shift that may propel India to 8% growth in the medium run. Any major reform would have teething troubles and GST is no exception. Technical issues in the GSTN portal and extended deadlines are bound to happen, given the magnitude of the reform and one must be patient to see the effects of GST bearing fruit. Addition of more enterprises in the indirect taxation system, increased transparency, significant reduction in time in the overall supply chain process are all going to be beneficial in the long run. Of course, people who are used to tax evasion all these years and people who do not think it is a crime to have black money and the parallel economy will not appreciate moves like demonetization and GST and there will be a sharp criticism of the government.
Can the Congress Party, which ruled the nation for the majority period since independence answer the following questions? In the first place, why was the informal sector allowed to grow so much and why were there no curbs on it? Why did majority of Indians not have a bank account? The Congress is making allegations that private investment is not picking up. The reason why private investment is not picking up is that there is no ease in credit flows and the primary reason for that is the mess in the banking sector that has a huge proportion of NPAs. Why did the Congress, which often accuses the BJP of being a suit book ki sarkar and pro-corporate, allow the NPAs to be built up? Why did Dr Manmohan Singh pressurize IDBI Bank to lend money to Kingfisher Airlines despite knowing the mess the airline was in? Under whose government did the fiscal deficit rise to 5% of the GDP?
The last point that I would like to touch upon is Congress and some of the social media warriors accusing Jay Panda of warming up to the BJP and PM Modi, which is why he is pro-demonetization and feels that these are teething troubles. Jay Panda is the one parliamentarian who returns his salary proportional to the time wasted in Parliament due to continuous disruptions. He has been championing some of the key initiatives like Ctizens’ alliance against malnutrition, support to the cause of migrant labor etc.