DeMo can’t fight black money: Leading business body

Assocham study finds note-scrapping can do little to stop parallel economy

GN Bureau | January 18, 2017


#business   #economy   #currency   #corruption   #black money   #Demonetisation   #Assocham  


 

If fighting black money is the aim, demonetisation is the wrong weapon, says India’s largest and oldest business body. 
 
“Demonetisation may wipe out the stock of black money held in cash but can do little about the ill-gotten wealth converted to assets like gold and real estate and the scrapping of high value notes does not prevent the future generation of unaccounted money,” the Associated Chambers of Commerce and Industry of India (Assocham) said in a release on Tuesday, based on its study.  
 
While the study speaks of the possibility of wiping out the existing stock of black money, reports suggest that nearly all issued currency has come back in the banking system, and thus the move has failed to strike out even the existing stock of black money. In this context, Assocham secretary general DS Rawat noted in the press statement, “Indications that most of the scrapped currency has returned to the banking system through right or wrong means do suggest that demonetisation may not even fully wipe out the existing stock of ill-gotten cash. To that extent, even our study may turn out to be ambitious if the tax authorities are not able to trace the money laundered through different accounts. Given the resource constraints with the tax authorities, carrying out such an exercise for identification of laundered money may be a herculean task.”  
 
The argument, of course, has been made by many, yet coming as it does, even belatedly, from a leading business association shows unease in the economy about the move. 
 
“Invalidating existing high denomination notes addresses the stock of black money but little to address future flows. Eliminating such flows will require further reforms like lowering stamp duty on property transactions, electronic registration of real estate etc.,” the Assocham said. 
 
It also criticised loopholes in the high denomination currency withdrawal. “It is very difficult to separate black money from white money because distinction is not once-and-for-all. White money used to purchase something becomes black if the shop-keeper does not pay sales tax…”  
 
Much of conspicuous consumption is paid for in unaccounted money, which, in the hand of the recipients can again become perfectly legal income, it argued. Benami deals in real estate and commodity markets make it difficult to trace the transactions to the ultimate buyer or seller. “Even if the existing stock of illegal currency is wiped out by demonetization, it will be soon replaced as long as such points of contact exist between legitimate and illegitimate deals,” said the ASSOCHAM study quoting the Economic and Political Weekly journal. 
 
It said ultimately the problem of undisclosed incomes and wealth has to be tackled at the source. The government  must reduce  the opportunity and incentives for unaccounted  transactions by narrowing the gap between the market value and the one fixed by the government agencies for different levies like stamp duty etc.  
 
The chamber suggested several measures to check the menace of black money.  These include reducing discretionary powers to officers, which is possible if the rules and laws are crystal clear and are not left to individuals’ interpretation. 
 
“Ironically, several of our laws are badly drafted and framed, leaving scope for official discretion. The problem in a way starts here,” said the chamber, adding a strong political will would be required to deal with this issue.  Bureaucrats drafting the proposed legislations should be clearly instructed not to leave any grey areas.
 

Comments

 

Other News

Cyclists plan ‘memorial ride’ to press demand for infrastructure

Cycling is a passion for many, and it is a way to fitness too. With rising numbers of vehicles on the road, the government encourages this environment-friendly mode of transportation, but it comes with numerous challenges. An accident last month on the Mahipalpur flyover of south Delhi, which took the life

“World headed towards stagflation; India must take care of the poor”

As the post-pandemic fallout and geopolitical uncertainty slows down global economies and sanctions against some nations, energy crisis and inflation are adding to the troubles, India is projected to be decoupled from world economy and fare better. To check if this belief really holds water, in the latest

The changing nature of CSR in India

With the advent of globalization came a new set of challenges for corporations, notably the duty of ensuring the well-being of all stakeholders while also protecting the planet`s natural environment. Although we are dedicated to a faster and more inclusive rate of growth, it is equally imperative that we f

BMC commissioner Chahal conferred with hon. doctorate

BMC commissioner and administrator Iqbal Singh Chahal has been conferred with a Honorary Doctor of Science Degree (honoris causa) by Guru Nanak Dev University in Amritsar, Punjab. Chahal was conferred the degree during the 48th convocation of the University in Amritsar at the hands of Punjab

Sebi to have two-track approach on ESG

Securities and Exchange Board of India (Sebi) aims to use a two-track approach on environmental social and corporate governance (ESG). Addressing a conference on ‘ESG for Atmanirbhar Bharat` in Mumbai, Sebi chairperson Madhabi Puri Buch said that that there should not be a single carbo

Accuracy more important than speed in news: Anurag Thakur

Presenting authentic information is the prime responsibility of media and that facts should be properly checked before they are put in the public domain, union minister of information and broadcasting Anurag Thakur has said. “While speed with which the information is transmitted is imp

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter