[Non-JNU Academic] On Demonetization

Do you think:

  1. Demonetization is simply pain for poor and wont solve anything?
  2. The rich with black money wont get affected?
  3. Feel the queue in bank is too much of a pain?

Then please read this blog:

Everyone in India want to get rid of corruption but when the government asked for people’s help in demonetization a certain section of leaders were quick to politicize the issue. As soon as the issue got politicised the followers of those leaders quickly stopped supporting a genuinely good step by the government, which is aptly called a surgical strike against black money. In fact I have even seen people initially supporting the measure but when the leaders politicised it they are now saying it is a useless exercise which only adds to the pain of “Aam aadmi” without solving the issue. So let’s look at some numbers and history of this government’s planned and structured war against corruption.

India’s total tangible wealth is of around 280 lakh crores[1]. World bank estimates at least a quarter of this is black[2]. That means 70 lakh crores. It is possible that 10% of it is in cash, with the rest in real estate and gold. That is 7 lakh crores of black cash that is lying around. Maybe 80% of it will turn white and even with that Rs 1.4 lakh crores of black will be gone. That is big.(Balaji Vishwanathan in Quora).

This figure is comparable with 2G scam(2lakh crore). And remember it was a very conservative estimate(assumptions of 80% and 10%).

There are followers of Lutyen’s mumbo-jumbo who will quickly rise the question that this money wont be recovered, it will simply be removed from the people who hold it. Then ask about how much money government had to spend for this clean up and how much the “poor” people had to suffer to exchange their hard-earned money. Here is my research on amount that was spent.

From a critical source [3] the amount that government will have to spend for printing new notes is 11,900 crore(assuming we replace all 500 and 1000 with 100 which we are not doing). Let’s be very critical and say it costs another 10,000 crore in shipping etc. so we are spending 22 thousand crore to remove over 1.4 lakh crore black money. Here also we have taken huge margins for calculation.

Of course the Lutyen’s intellectuals wont like spending 22 thousand crore to remove 1.4 Lakh crore black money. They only like making video tapes of Rs100 bribe you gave to policeman on road. Since I have better memory than the left-liberals I recall that Modi government had a scheme to disclose black money and pay 45% tax on it. In that scheme over 65 thousand  crore was disclosed[4]. So the central government had already raised 30 thousand crore tax. Even if the it spends 22 thousand crore on demonetization, our central government will still have 8 thousand crore left.

These are all tangible and measurable benefits. I can think of at least three more intangible or hard to quantify benefits:

  1. Every note that is burnt or deemed useless(in this case 1.4 lakh crore) and is not converted into usable asset, is going to improve the value of the total usable money. Because people who do have genuine money got their money value improved. You will shortly see houses becoming more affordable.
  2. generates fear among black money holders
  3. Forces people to use more plastic money

I should also remind some of the steps taken by this government against black money because public memory is poor.

  1. SIT against corruption was the Modi cabinet’s first decision[5]
  2. Jan dhan yojna so that everyone has bank account and can do all legal transactions
  3. emphasis on Aadhar so that they can use it to exchange money today
  4. Making swiss bank account holders name public [6]
  5. GST so that direct taxes are streamlined. Payment of tax becomes easier and also trackable
  6. Scheme to disclose black money and rising 65 thousand crore
  7. and now demonetization without giving any time for black money people to hide their money

It is indeed a planned and structured fight against corruption by Modi sarkar. The government has right intentions, it has right plan and it is doing its best for execution. When it asks for little help from citizens isn’t it our duty to support the war against corruption that we so badly want to be removed from our society?

Now tell me, shouldn’t we all as Indians support this surgical strike against black money? Or is Modi the leader we need but not the leader we deserve? Are we fit only for blindly following the venom spewed by the JNU intellectuals?

[1]  gives this number at 3447B USD which is approximately 280 lakh crore INR

[2] It gives the number as 25% of GDP. Balaji vishwanathan can probably give you a better source as % of tangible wealth. I am not full-time researcher on these 🙂

[Hopefully more posts will follow under Non-JNU academic tag. This is an attempt to shift the center of power out of the Lutyen’s intellectuals and journalists]


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