One Year Of Demonetisation: Where Is The Black Money?
The debate over whether the government has been able to tackle black money rages on.
A year after demonetisation, the debate over whether the government has been able to tackle black money or unaccounted wealth still continues. Demonetisation led to “short-term political gains for the ruling party and long term pain for the economy,” Swaraj Abhiyan Founder Yogendra Yadav told BloombergQuint in an interview.
The fact that 99 percent of the demonetised currency came back into the banking system, as per the Reserve Bank of India’s annual report, proves that the government has failed to extinguish black money from the economy.
Tax expert TP Ostwal disagrees. According to him, one year is not enough to judge the long-term impact of demonetisation and it will take longer for benefits to materialise. He is, however, critical of the manner in which demonetisation was implemented, saying it has allowed many to get away.
The biggest blunder was giving 50 days time. If the government had created little stock of money and kept a seven-day window for people to deposit money; continue to carry out transactions through cheque or any other mode other than cash, possibly it would have given better results.TP Ostwal, TP Ostwal & Associates
Arun Kumar, author of The Black Economy In India, who has studied the black economy for decades, said demonetisation was misdirected from the very first day. “Cash is less than one percent of black wealth,” he added.
My own estimate is there is black wealth of Rs 300-400 lakh crore. Black cash was Rs 3-4 lakh crore and black income generation was Rs 93 lakh crore last year. So if you demonetise currency, you would have affected only less than 1 percent of the black wealth.Arun Kumar, Author, Black Economy In India
The government is still scrutinising deposits made in the aftermath of demonetisation. About 17.73 lakh suspicious cases involving Rs 3.68 lakh crore have been identified by tax authorities in the last one year, wire agency PTI reported yesterday. The department has picked 20,572 tax returns for “detailed scrutiny” suspecting discrepancies in incomes before and after demonetisation, PTI added quoting official sources it did not identify.
The government does not have the machinery to audit such a large number of people. They’ve issued 18 lakh notices, usually we are able to investigate 5 lakh notices a year.Arun Kumar, Author, Black Economy In India