Wages and Income Tax amnesty scheme

              How to pay the monthly wages and pensions to millions of employees and pensioners across the country?  Even if the partial payment is made through banks, few million currency notes will be required.  Small firms started coupon distribution business as weekly or fortnightly wages as an alternative to currency.  The utility of coupons is limited, as coupon is not a hard earned currency.  Private companies are directed to digitize the payment system.  This will ease some pressure on currency distribution.  Simultaneously, the central bank is printing and issuing different denomination notes day and night.  Reserve Bank of India has released less number of Rs 500 notes that has hampered routine transactions.  Banks are trying to ease the inconvenience caused to salaried class.  Now-a-days calibration of ATM work is in final stage.  Public is utilizing ATM services for withdrawal of Rs 2,500 a day or Rs 24,000 a week.  Fraction of country wide transaction is in digital mode; further enhancement of digitalization in the shortest span of time is a challenging task.  Government has recently directed banks to disburse small currency notes in rural area to cater the demand of unorganized sector.  It seems, the government is still on oxygen.  The first week of December is the test week for Modi Government.

            By now, more than Rs 9 lakh crore of Rs 5,000 and Rs 1,000 notes are deposited in banks.  It comes to about 60 to 65 per cent of the high value currency in circulation.  By this speed about 90 to 95 per cent currency will be deposited by December end.  This indicates only Rs fifty thousand to one lakh crore quantum of black money will not return back to the main stream.  How to distinguish between black money and hard earned money from the total amount deposited in banks and post offices is the biggest question?  Income tax department will have to find out ways and means to isolate the quantum of black money from the total high currency notes deposited at different destinations.  The whole exercise will be gigantic, cumbersome, complex, time consuming, painstaking and expensive.  To identify and punish the culprit is not only adamantine but practically unthinkable.

               Politicians will be the first tribe to malign the image of PM Modi provided the government fails to address both these burning issues.  Perhaps amnesty scheme is the outcome of the face saver and fiasco fear. 

Amendment in Income Tax Law

                 In continuation with eradication of black money scheme, Modi Government has decided to give a bit relief to black money holders.  The probable reason is to bring large number of people in income tax net with fair assessment.  BJP brought Income Tax amendment bill and hurriedly passed it amid commotion in Lok Sabha.  The declarant will have to pay 30 per cent tax with 10 per cent penalty along with surcharge on undisclosed income.  The total amount payable will be 49.9 per cent.  Additionally, 25 per cent will be deposited without any interest and the locking period will be four years.  Government has launched ‘Pradhan Mantri Garib Kalyan Cess’ where 33 per cent on the tax paid by the declarant will be used under this scheme for the welfare of the down trodden people.  The amendment in Income Tax laws were brought with the view that the black money holder shall not take disadvantage of different sections of existing IT laws.

            Time allotted for discussion in Lok Sabha was hardly two hours.  The bill passed without any discussion.  Muddle continued for one or the other reasons.  In clutter, opposition parties raised varied issues related to present demonetization policy.  In Rajya Sabha things are not different.  Discussion continued on definition of money bill.  Money bill indicates no voting in Rajya Sabha.  The strength of opposition is more than ruling parties; so, it is obvious to play tricks rather than facing an orchestra.   It seems Government has decided to pass the IT amendment in Rajya Sabha in the same fashion as that of in Lok Sabha.

                In principle, each and every bill must be discussed at length in both the houses.  Consensus after in depth discussion is always beneficial.  Many of the members in parliament are intelligent and diligent enough to evaluate the each and every content of the bill in the light of its long term utility and suggest, amend, modify it accordingly.  Many parliamentarians are chartered accountant, advocates, judges, law and political science graduates.  Their part in discussion is always beneficial.  If Government passed the IT amendments by not taking parliamentarians in confidence then it will culminate into censure on the part of Modi Government.

                It is always good to take confidence of people.  Let the bill be put in public domain and invite the suggestions of the people of India.  Why not a law be passed wherein all the bills, amendments etc to be put in public domain and then the contents to be finalized for approval of both the houses.  For instance, in the recent past the PMO has sought suggestions from public with respect to demonetization policy.

Will demonetization wipe out black money?

               Chhibber in his recent article published in esteemed newspaper Indian Express dated November 28 categorically pointed out that the policy bound to have collateral damages.  It is a blunder rather than its affirmative effect to curb black money from the root itself he stated.  His analogy is countries like Zimbabwe, Argentina, Myanmar, Ghana, Soviet Union, Nigeria and Zaire have demonetized their currencies without any significant achievements.  Black money holders always transformed it in gold, real estate and offshore investment.  Furthermore, demonetization to be undertaken only when economy gets tumbled and inflation reaches at a higher peak.  His assessment is black money will reduce by 0.5 to 0.75 per cent of GDP but damages to the economy will be huge and unsustainable.  Rural based economy along with MSE will tumbled down and culminated to negative GDP growth.

            What legacy the present Government received from Dr Manmohan Singh Government was scams after scams.  Poor become poorer.  Agro based industries and MSE which are major employment provider were received in bad shape.  Politicians played with the life of common man.  Suresh Kalmadi, Raja, Kanimozi and many more have tarnished the image of Indian society.  There was rampant corruption at every level.  A decade of corrupt Congress raj culminated in to wealthy became wealthier.  There were no social, political and economical reforms for a decade.   

Now, ours is a growing economy.  Modi Government is adopting reforms one after the other.    To root out corruption, bilateral agreement with different countries is in progress, automatically information will be received as and when Indians will carry out transaction in other countries.  Efforts are being made to bring black money holder in tax net.  This is the beginning, not the end.  PM has already hinted in his speeches that next step is to curb benami properties.  Gold will probably the next target.  So, no need to panic.  Positive steps definitely will yield desirable result.  So, wait and watch.

Country wide bandh on November 28

On November 28 the combined opposition parties has declared protest day all over India against demonetization policy.  On one side opposition does not allow the parliament to work and to the other instigating public to participate in country wide bandh.  Economist and former PM Manmohan Singh speech in Rajya Sabha was against the spirit of economic reforms of 1991.  His assessment of drop in GDP by 2% will be short lived if Government and RBI play a positive role is efficient utilization of collected booty.  It seems that Mamta Banerjee, Chief Minister of West Bengal intends to play a major role.  Probably she wants to centre stage the show.  Her emissary are contacting JD(U) alley to participate in large number.  Division surfaced in JD(U), fraction joined opposition parties during protest in and outside parliament, under the leadership of Sharad Yadav.  Contrary, Nitish Kumar reiterated that the NDA move is good.  His objection is on inconvenience caused to the general public because of non-availability of new currency.  Nitish Kumar further stated that PM should take stern steps to curb benami properties.  Bihar Chief Minister has already taken strict measures in his home on black money holders.  Lalu Prasad’s RJD is eager to participate in tomorrow’s bandh.  As usual, Sharad Pawar’s policy is wait and watch.  His party may take different stance at the last minute.  It is practically difficult to assess the mood of Pawar.  Shiv sena seems to be in doldrum, to oppose or not to oppose.  It seems Navin Patnaik’s BJD will not join the bandh call.  Better not to talk about Mayavati.

The success of the story lies with general public.  The mood of majority of citizen is to support Government policy on demonetization.  If the opposition move boomeranged, certainly, it will culminate in another economic revolution.  PM Modi will further tighten the rope.  Economic reforms shall have synergetic effect on social and political reforms.  One may expect Robinhood avtar in near future.

MSEM: Conceptual alteration post Demonetisation

Micro Small and Medium Enterprises (MSEM) contributes 40 to 45% of total engineering export.  The employment generation potentiality from formal and informal sector is far from multinationals companies.  Demonetisation has broken the basic structure of MSEM.  Major junk of them have not so far registered, that jeoparadised their existence.  The workforce is usually uneducated with rural background and are receiving weekly cash payment.  The sector is unorganised, the wagers bank account are not associated with Adhar and PAN numbers if at all opened under Jan Dhan yojana.  It tantamount to guilt on the part of employer.  Employer himself is in hot water.  Money crunch hampered the routine, withdrawal limit chaos manufacturing output.  The rupee dollar ratio is widening day and night.  So, urgent need is to raise withdrawal limit or otherwise the whole export will get collapsed soon.  Government in association with RBI should have a fresh approach, otherwise, to sustain for longer period will spoil the broth.  Fresh loans with lesser interest should be provided without any delay.  It is likely that the surplus amount available after demonetisation shall have positive impact over MSEM.  It is possible only when substantial amount will be reserved for these sectors.      

Demonetisation and Agrarian society

Two weeks are over from the day the demonetisation policy was broadcasted for the first time by PM Modi.  Beyond doubt, common man suffered a lot due to its inappropriate implementation.  The real sufferers are farmers, land less labours, micro rural entrepreneurs and whole rural mass those are 65% of our population.  First, so far the nationalised banks and private banks have not spread tentacles in rural areas that has caused lot of hardship.  Second, the wings of cooperative banks - backbone of the rural economy - ware slashed resulted into economic instability.  Third, the age old practice is to store hard earned money at home.  So, to convert old hard earned currency of Rs 500 and Rs 1000 to new notes was the biggest headac.  Fourth, how and where to sale the home grown vegetables and grains, a how and from where to purchase seeds and fertilizers, since, not a single trader is ready to provide credit facility.  Fifth, 'hand to mouth' is a key word for poor masses, thus, currency crunch resulted in 'no money no food' phenomenon.  Sixth, callus attitude of government agencies.  Not a single government employee has addressed the agonies of those resided in 6.5 lack villages spread across India and come forward with practical solution.  Some gullible announcements on later days has adversely affected the already spoiled scenario.  Seventh, rumours had spoiled the complete broth.  The net result is the whole spectrum of vote bank is likely to boomerang in the forth coming election provided think tanks will not act swiftly to solve the core issue.  Lesson the Government should learn from the incidence is, for the heterogenous populace, the best policy is stepwise reforms and not the sudden jerks to the core policy.

     

Demonetisation and Terror

Vappala Balachandran postulated that (Indian Express dated November 23, 2016) demonetisation of high value currency notes has marginal impact on terror activities.  Cashless economy doesn't indicate void from terrorism.  The author elaborated incidences wherein rampant terror activities are noticed in countries like Belgium and France where almost transactions are cashless.  Every move from government always been counteracted.  It is obvious that evils involved in negation supposed to be intellectuals.  They mend with the circumstances.  They are always ahead as educated radicals are joining the groups day in and day out.  Terrorism is a global phenomenon.  Please note, Islamic radicals have bases and slipper cells in more than fifty countries.  So, let us consider hammering black money is one of the steps to counter terrorism.  Allow PM to act positively in this direction to curb terrorism from the root itself.  Criticism is easy but to take bold steps is practically difficult.  Nation is noticing what steps PM have implemented for the welfare of the common man on one side and control over nefarious activities on the other.  Strengthen the hands of PM so that he will focus on all facets of terrorism and its marginalisation.  We are fortunate that the person at the helm of affairs is doing good job.  Let us support the noble cause.

                    

Prime Minister Questionnaire

Prime Minister Narendra Modi has rightly released questionnaire to ascertain the mood of the public regarding demonetisation policy.  Almost two weeks are over.  On channels and in print media politicians and experts have opined pros and cons of demonetisation of Rs 500 and 1000 notes.  Section of the society has also expressed their views.  PMO office gets regularly updated with latest happening in the nook and corner of the country.  Government is extending meager concessions looking at mesaries facing by the society.  So called 'shock' period is over.  Time has ripened to assess the outcome at field level and that too from horses mouth.  Now, the boll is in public court.  People are the best judges.  Please participate in the 'mahayagna' and give your frank opinion.  Certainly PM will analyse and interpret the questionnaire and then alter the present demonetisation policy so as to have short, medium and long term effect on curbing the corruption from the society.                        

Cashless Economy

Cash is the only mode of transaction for people of more than six lacks villages in India.  Small traders who are more than 1.5 crore and poor people of urban semi-urban areas, labours, daily wagers and even lower middle class society are totally depend on cash and are not connected with banks.  Jan Dhan Yojana might have compelled them fractionally to associate themselves with banking system.  However, for day to day activity cash is an essential commodity.  In vegetable and grain market all transactions are in cash.  When more than 65% of Indians are struggling for one square meal how we expect to transform the country from cash to cashless in one stroke.  To quote an example, mobile is an essential commodity in metros and cities.  On the contrary, today also mobile is unessential to rural masses.  Slowly and steadily mobile is being introduced in these areas with restricted applicability.  Its fullest utility at every nook and corner will require many more years.  In the same fashion cashless economy will be a dream rather than reality in the present context.  The basic reason is nothing has reached up to village level.  Observation made by Rajiv Gandhi regarding 16% utility of fund at receiving end is correct and applicable in the present context.  Experience says that in India reform is always at snail speed when we talk about poor masses.  So transition form present to cashless society is only possible if reforms are made at every level.  Education, health, family planning, road, water, housing are some of the areas where immediate attention is required.  Banking and non-banking institutions needs to introduced and strengthened at village level.  Through Jan Dhan Yojana villagers and poor needs to be educated so that they will realize the importance of banking institutions.  Then only slowly the dependency over cash will be reduced.  Please do not compare well educated urbanite with poor villager.  There is a big gap.  Aspiration of both differ.  Our objective should be to reduce  the gap then only dream of cashless economy will become a reality.

  

    

Financial relief through Jan Dhan Yojana

Narendra Modiji has publicly announced regarding demonetisation that Government will pay to the society back with interest provided people will bear with him for fifty days.  On an average there are 25 crore Jan Dhan Accounts.  If PM announces that the Government will deposit Rs 5000/- in each account then a total of  Rs 1.25 lakh crore will be required.  This amount to be deposited in the third week of January.  Obviously, more than Rs 5-7 lakh crore black money will not be demonetized.  Automatically the Modi Government will be in profit of Rs 3.5 to 5.5 lack crore.  By announcing this package the public at large will get relief from the present crises.

There is an urgent need to address difficulties of agrarian and labour class.  Surgical strike is required to benefit farmers regarding seed and fertilizer purchases and also marketing of their products.  Temporary mobile currency facility may be provided in mandi whose number does not exceed more than lack.  At once seed and fertilizer to be given to the farmers through government machinery.  The daily wager will be given wages without any delay.  Government employees will distribute the wages.  The disbursed amount shall be deducted during finalization of contractor bill.  There is news that private contractors ran away without payment.  The action should be taken against them immediately.

  

          

         

Social Reforms

Salutation to PM Modi for implementation of economic reform.  The steps are taken to control corruption by demonetisation of  Rs 500 and 1000 notes.  Now, prerogative on the part of the Government should be to shift the paradigm towards social reform.  Hastily another economic reform implementation may boom-rang as the opposition parties are trying to capitalize it.  During Indira Gandhi's regime ban on alcohol consumption lifted just to increase revenue.  The wise lady never thought of its after effect on society in general and village flock in particular.  Poor families are facing a lot problem due to spurious alcohol consumption.  It has changed the whole demography of the villages.  No money, no education, no food, no family planning, thrashing and what not.  Poor are becoming more poor.  Same vicious cycle continues generation after generation.  If country wants to bring social reforms at root level then the first step should be total ban on alcohol production and consumption.  What ever the home maker earns the major share diverted towards liquor consumption.  Being physically weak it become practically impossible for her to resist.  Her dreams remain dreams only.  This is the right time for Modiji to reform the society at grass root level.  He is the man with conviction.  If PM undertake economic, social and administrative reforms one after another the poor mass of the society will transformed to his favorite voters.  Millions of poor will give blessings from core of their heart.  

SC observations on currency crises

Today the Supreme Court opined regarding present currency crises that may lead to turmoil on streets.  SC suggested Government to take necessary steps at once indicating inadequate preparation before its implementation.  The observations of SC are sufficient to add fuel in jingoistic behavior of opposition.  It is likely that in a day or two opposition parties are likely to carry out demonstrations on streets.  Indications already given by AAP's Kejriwal and TC's Mamta.  The EC has objected on use of ink.  Both houses are not functioning.  Nutshell, the opposition has got golden opportunity to unite against NDA.  NDA alley Shivsena also flip flopping with opposition and ruling party.  News from different states are not conducive.  If situation goes out of control then it will be practically difficult to control a mob at every nook and corner.  This is the litmus test for Prime Minister.  Let us see what happen.  Certainly the last person in hierarchy is facing a lot difficulties but his desire is to curb black money from the root itself.  It is public to choose their path.

Demonetisation Politics

Warm article 'you have been warned' by Pratap Bhanu Mehta published in The Indian Express today i.e. on November 17, 2016 was noteworthy to read.  However, the author has not suggested ways and means to strengthen the Government policy so as to curb black money from the root.  Notwithstanding the fact that the central government has not sought advice from specialist before its implementation as it was a secrete mission.  In the present context it is necessary to guide the force rather than to sabotage the issue as it is of national importance.  The articles so far published since November 8, 2016 in national dailies and at length discussions over TV channels indicates only negativity with affirmative consensus on one point that the policy is good.  The author tried to avoid the criticism part of the story though approach was in the same direction.