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

Covid-19 antibodies found in 86.64% Mumbai citizens

As many as 86.64% citizens of the city of Greater Mumbai have antibodies, according to the fifth sero-prevalence survey. Among the people who are fully or partially vaccinated, the antibodies were found in 90.26%, while among the unvaccinated citizens, 79.86% had antibodies. The Municipal C

`Bad Bank`: All you wanted to know about NARCL

The cabinet has cleared the formation of ‘National Asset Reconstruction Company Limited’ (NARCL) which will acquire “stressed assets” of about Rs. 2 Lakh crore in phases within RBI regulations in order to address the problem of humongous amounts of bad loans in public sector banks.

Citizens Charter: How this less-known law empowers us

When consumer rights and RTI activist Mohammad Afzal was shifting to a new residence in a different area, he required changes in various documents. He decided to take the help of the Citizens Charter along with other friends who also required similar work with authorities. The Citizens Chart

Minister for Ports, Shipping & Waterways emphasises on setting up of National Transport Facilitation Committees

Union Minister for Ports, Shipping & Waterways and AYUSH, Sarbananda Sonowal has underlined the importance of cross-border connectivity among India and developing nations of South-East Asia. Addressing the ASEAN summit on Future of India-ASEAN Connectivity Partnerships virt

Ministry of Finance organises advance training programme in PPP for states

The Department of Economic Affairs (DEA), Ministry of Finance and the Indian Institute of Management Bangalore has organised a virtual advance level training programme on Public-Private Partnership. Additional Secretary DEA, K Rajaraman, Joint Secretary, DEA, Baldeo Purushartha

Ministry of Agriculture signs MoUs for Digital Agriculture

Modernisation of the Agriculture sector will continue by infusing new technologies so that farmers can increase their income, states Agriculture Minister Narendra Singh Tomar. The Ministry of Agriculture and farmer welfare has signed MOUs for pilot projects with Cisco, Ninjacar

Visionary Talk: GVL Narasimha Rao, Member of Parliament, Rajya Sabha on Upcoming UP Elections


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter