03 JULY 2023


5.7: Another group of ‘prominent’ citizens opined: “Black money is generated through evasion of taxes on income from lawful activities and money generated from illegal activities. In the absence of steps to curb the generation of black money, demonetization is a futile exercise, as it proved to be in 1978.”

5.8: Another failed prediction from a group of citizens, after 7 years. Demonetization is certainly not a “futile” exercise: even though there could be different opinions on the degree effectiveness, there has been no question on effectiveness as such. Note the safety clause in this statement that the group of prominent citizens have inserted: “In the absence of steps…” These experts are adepts in making statements that are always neutral- they are neither useful nor harmful and as such do not have any weight.

6.0: Direct tax collections:

6.1: Another report said: “India’s direct-tax-to-gross domestic product (GDP) ratio had been falling steadily from 6.4% in 2008 to 5.4% in 2016—a fall of 1% over the 8-year period. However, this declining trend reversed from 2017- (just a year from demonetization,) and has steadily increased since then to 6% in 2019. Compared to the trend that prevailed, demonetization has increased the direct tax-to-GDP ratio by 0.2%, 0.8% and 1% amounting to ₹40,000 crore, ₹1.25 trillion and ₹1.89 trillion in direct taxes in 2017, 2018 and 2019, respectively.

6.2: After 7 years, the direct tax collections have registered record levels of growth and quantum, exasperating the opposition parties apparently headed by Congress.

7.0: Digital economy:

7.1: Pointing out that only a small percentage (by some estimates as low as less than 6%) of the unaccounted wealth is held in cash, an expert said:

7.2: “The Indian reality, is that many trades and areas are still cash-based and cannot be digitized just by willing it.” He cautioned that the “resulting disruption in the real economy stemming from this move is very significant and potentially fatal” for some vulnerable sections of society. “If some of the key areas are hampered, there is risk of mob violence and rioting. Since the entire country is at risk, there is no way of anticipating and preparing for this, either. So there is a risk of the situation getting out of hand as well.”

7.3: But the whole world is surprised how digital transactions are accepted even by street–corner small stores – not to mention beetle leaf sellers (pawnwalas) and small mobile eateries on the road. No country in the world, small or big, has achieved this as yet. G-7 and G-20 countries want to know from India how to do this.This group does not know the pulse of Indians, Indians have hardly ever revolted on any issue.

7.4: The same expert continued: “for sectors like real estate, a notorious hotbed for black money transactions, there will likely be disinflationary pressures short term, with prices being pushed downward before they stabilize longer term.”

7.5: Here he was right only partially, as there were vast regions in the country where the real estate prices were stable and never went down.

7.6: Another expert said it:“The fact that the government has already announced Rs2,000 notes is a tacit admission that people need higher denomination notes in the future due to inflation. Expected inflation is running high due to India’s monetary and fiscal history. Small notes will rapidly lose further value so that essential goods cannot be purchased with a reasonable quantity. Governance needs to be improved in all its dimensions. Cosmetics will not cut it.”

7.7: On the other hand inflation has kept to projected levels and kept low to the envy of even G-7 and G-20 nations.This experts cosmetics charge did not come true.

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