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22
February 2017
One
of India's leading experts on the black economy, who has studied, written about
and lectured extensively on the phenomenon for nearly four decades, has said
that the demonetisation design is flawed, the objective has not been achieved
and there is a very real danger of the shortage of currency translating into
recessionary conditions as the economy continues to suffer.
"While
the objective of dealing with the black economy and terrorism has not been
achieved, the economy is suffering. Any move to check the generation of black
money should have been targeted at those who generate it without hitting
others. It will not have any long-term impact on the black economy,"
economist Arun Kumar, who taught at Delhi's Jawaharlal Nehru University (JNU)
from 1984 to 2015, told IANS in an interview.
"Events
in the last three months show that demonetisation cannot tackle the black
economy since cash does not mean black. Hence, the design of the policy move is
basically flawed. While the notes shortage will dissipate slowly in the coming
months, the slowdown in the economy is not getting less. Thus, the problem is
transforming from notes shortage to recessionary conditions in the
economy," said Arun Kumar, who played a role in drafting the Janata
Party's manifesto ahead of the 1989 Lok Sabha elections. The Total Investment & Insurance Solutions
Arun
Kumar's book "Understanding the Black Economy and Black Money in
India" (Aleph/Rs 399) argues that the Narendra Modi government's sudden
demonetisation of Rs 500 and 1,000 notes in November 2016 "failed to put a
dent in the black economy but caused untold hardship" to hundreds of
millions of Indians. The Total Investment
& Insurance Solutions
He
said that cash is a stock and its removal, even temporarily, does not mean that
the generation of black income by various devices will stop. "The black
and the white economy are not parallel and the same currency circulates the
black incomes as the white incomes; so any black cash demobilised would soon
get regenerated," contended the author, who was educated at Delhi
University, Princeton University and JNU. The
Total Investment & Insurance Solutions
He,
however, agreed that the government is trying to take supplementary steps but
said that their impact has to be dealt with separately. "Moving towards a
cashless economy can be dealt with independent of demonetisation and should be
evaluated separately. If raids are to be conducted to unearth black money, that
also can be done independent of demonetisation. The two should not be linked
with each other," he argued. The Total
Investment & Insurance Solutions
Arun
Kumar lamented that India's black economy results in policy failure and
tremendous inefficiency, in continuing poverty and unfulfilment of national
goals.
What
then is the reason behind the enormous presence of black economy in the
country?
"Since
the black economy is now 62 per cent of GDP, it implies illegality in 62 per
cent of economic activity. It can only be so large if the black economy is
systematic and systemic. This is only possible if the state apparatus is a
party to the process of committing illegality and generation of black incomes.
Thus, the involvement of the policymakers (politicians) and the implementer
(executive) is needed along with the businessman," Arun Kumar quipped.
There
have been dozens of committees and commissions in the last 70 years that have
gone into various aspects of the black economy. They have given thousands of
suggestions and hundreds have been implemented and yet the black economy has
been growing.
"Demonetisation
is not the first step taken. The problem has to be tackled politically, so that
the triad (involvement of politicians, executive and the businessmen) is
dismantled. Even if one of its three arms are severed the problem will begin to
dissipate.
"This
requires accountability from each of the wings and that will only take place
when movements force them to do so. It will not happen by anyone's goodwill but
would be triggered by change in the consciousness of the people of the
country," Arun Kumar said.
He
expects the readers of this recent offering to understand the political nature
of the black economy and not think that there is a "magic wand" which
can instantly solve the problem.
"In
this sense, there are no immediate solutions and everyone has to work to
strengthen democracy in the country so that accountability is brought about.
The more people understand this and the more they oppose it politically, the
quicker the problem would be solved," he added.
"Understanding
the Black Economy and Black Money in India" attempts to tell its readers
why the November 8 gambit failed.The Total
Investment & Insurance Solutions
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