Tuesday, 6 December 2016

Post Demonetization: Scenario II


            The India's ruling party Bhartiya Janata Party (BJP) desires to take benefit of demonetization policy in electoral politics.  If the elections are held in January and February - Before the X and XII class board examination - the BJP will likely to sweep the polls, BJP sources said.  The TIME Magazine’s Person of Year award is recently announced.  Modi received 18% votes in reader’s poll well ahead of US President Barack Obama and many global stalwarts.  The party wants to cash the popularity of Mr Modi.  Prime Minister’s charisma may get eroded and the success of demonetization will not be transformed into vote bank if elections are deferred.
 
            Two Axis Bank managers allegedly played major role by accepting two per cent commission in money laundering racket of Rs 39 crore.  More than 3 kg gold bars were retrieved from their possession, Enforcement Directorate announced.  Many more persons were arrested including the Director of Beagles Marketing who is a daily wager and has no idea about the illegal activity.  In another case, the CBI has booked two bank officials – Chief Manager of Karnataka Bank and Branch Manager of Dhanlaxmi Bank – for allegedly facilitating the laundering of unaccounted money.  A fraud of Rs 5 crore has been detected.  It is likely that ED and CBI are going to conduct many more nationwide raids to unearth illegal transactions.

            Story of Sambhal district of Western Uttar Prasdesh is an eye opener for policy makers.  There are more than 75 thousand Jan Dhan accounts in Prathama bank.  Before November 8, a total amount deposited was Rs 44.70 crore and after the date Rs 73.16 crore.  In many accounts cash of Rs 49,000 was deposited.  Deposits under Rs 50 thousand in Jan Dhan accounts do not attract income tax scrutiny.  Ms Rinku Verma – Rs 49 thousand deposited in Jan Dhan account – said that her employer - Shivam Varshneya, Rice Mill owner – has given cash for father’s treatment and was substantiated by the owner.  When both the parties are hand in glove, how the black money is to be traced?  A small shopkeeper form Gazipur District of UP has deposited Rs 27 lacks in his Jan Dhan account on November 11; before that the amount deposited was paltry Rs 500.  His account was seized by CBI.  The shop owner claimed that the cash belongs to his mother who is saving money in wardrobe from last 20 years.  Other family members were unaware of the amount.  After she came to know about the news of demonetization, she asked her son to deposit the amount.  The story may be true or false.  In India, the age old practice is to store cash and ornaments at home only.  Housewives do keep cash at home; without the knowledge of husband and that too intentionally.  However, it is true that the Jan Dhan accounts are scrupulously misused, better not to speak about saving and current accounts.  Crores of unaccounted money has been transmuted to white money through varied ways and means.  Almost fifty per cent of money in circulation before November 8 was a black money.

            The finance ministry informed the government departments to make e-payment as and when the amount shall exceed Rs five thousand.  The government asked the shopkeepers to deploy point of sale (PoS) machine terminals or use different mobile apps as against money transaction.  Digital transaction will automatically deposit amount in bank account that will facilitate the account holder to take advantage of different bank schemes.  A total of 14 lack different devices are installed across the country.  The government is trying to reduce cost of point of sale machine.  The cost of machine must be attractive enough for small shopkeepers (1.5 crore) and small and medium businessmen (3.6 crore).  It is expected that 10 lack PoS machines will be installed before the end of financial year.  State Bank of India alone installing 1 to 2 thousand PoS machines per day as against 200 POS machines a year before.  The cost of the machine ranges between Rs 5,000 to 35,000 depends on different features.  Many national and international companies are advertising e-wallet apps; even PSU banks are not far behind.  At present, India has two POS terminal per thousand debit card holders, far lagging behind than emerging economies.  ‘India will need 2 crore PoS terminals as against the current 2 lakh’ RBI Deputy Governor, R Gandhi said.  In order to achieve the cashless transaction goal it will require two years or more.

            The service sector and manufacturing sector affected due to reduction in money supply.  The Nikkei India Services Purchasing Managers’ Index (PMI) reduced down to 46.7 in November from 54.5 in October for service sector.  As and when the index goes below 50 indicates sector is not performing well, PMI above 50 means the sector is expanding.     

            The sad part of the story is, more than hundred people lost their life from the day Demonetization policy were declared.  In the recent past, 65 year ex-serviceman died while standing in a queue at Amritsar;  a lady of Aligarh, Uttar Pradesh immolate herself for failing to exchange six notes of Rs 500.  Many were died in long queues across the country.  It is imperative on the part of government to provide all facilities so as to keep people comfortable when they are in queue.


   

No comments:

Post a Comment

Indian Stand: Champions Trophy

                                                                                    Mohan Kothekar It has been decided by the ...