Anil Bokil, associated with Pune’s economic thinktank ArthaKranti Pratishthan, was among the first to recommend demonetisation to Narendra Modi when he was Gujarat’s chief minister. Bokil’s NGO has also readied a template, which he says will stop generation of black money in the system. Bokil spoke to BW Businessworld’s Suman K. Jha.
Excerpts: When did you realise that the government would accept your recommendations on banning Rs 500 and Rs 1000 currency notes? Did you have a meeting with PM Narendra Modi on this? Since the ArthaKranti Proposal came into being in 1999, based on our study, we were confident that the government will have to accept it. It was only a matter of time. We presented the entire ArthaKranti proposal to Narendra Modi, then Gujarat CM, in July 2013. We last met the PM in July 2016.
Apart from banning these currency notes, what other measures need to be taken to unearth black money across the country? We propose the implementation of the ArthaKranti proposal in totality, along with a well- designed amnesty scheme.
What is the ArthaKranti proposal?i. Withdrawal of existing taxation system completely* (except customs/import duties)
• All central, state and local government taxes — direct as well as indirect
ii. Every transaction routed through a bank will attract a certain deduction in appropriate percentage (say two per cent) as a bank transaction tax (BTT) (a single point tax deducted at source)
• This deduction is to be effected on receiving/credit account only
• This deducted amount will be credited to different government levels like Central, state and local (as say, 0.7 per cent, 0.6 per cent and 0.35 per cent respectively)
• Transacting bank will also have a share (say 0.35 per cent) in the deducted amount as the bank has a key role to perform
iii. Cash transactions will not attract any tax
iv. Withdrawal of high denomination currency (say above Rs 50)
v. Government should make legal provisions to restrict cash transactions up to a certain limit (say Rs 2,000)
This means, cash transactions above this limit will not enjoy any legal protection.
Did you also meet other BJP leaders, other than Narendra Modi?Yes, we have been meeting L.K. Advani, Yashwant Sinha, Nitin Gadkari and others. We also met Suresh Prabhu when he was in the Shiv Sena. He was quite impressed with our proposal. Gadkari and Prabhu have encouraged us.
Did you also meet Opposition leaders? We also met Rahul Gandhi and Manmohan Singh of the Congress.
In the last two and a half years, the Modi government has initiated a number of measures to unearth black money. How do you evaluate them? We observe that this government’s initiatives (like Jan Dhan Yojana, direct cash transfer, linking of post-offices with retail banking, payment gateways etc.) are in tune with the effort of making financial transactions more transparent which certainly result into effective checks on circulation of black money in the economy. However, we also believe, that generation of black money can be stopped by implementing the ArthaKranti proposal in totality.
Do you think the introduction of Rs 2000 currency notes is part of the measures to curb black money or could it also result in a problem? In our opinion, it is a stop-gap arrangement put in place to address the likely severe liquidity crunch due to sudden withdrawal of about 85 per cent of monetary value in the form of Rs 500 and Rs 1000 currency notes. To absorb this shock, Rs 2000 notes have been introduced, which will replace Rs 1000 currency value in half the number and in the shortest possible time.
Was the hardship the common people are facing due to the present situation avoidable? We presume this decision has been taken in view of the compelling reasons (acknowledging signals of threat to internal security due to counterfeit currency supply to terrorist outfits in India). This decision could have been executed in a more smooth way as proposed in the ArthaKranti Proposal Transition Plan.
What did you propose? • As a part of transition, a clean amnesty scheme to be announced in which all demonetised currency money to be deposited in individuals’ accounts
• These deposits beyond a certain limit, to be converted into government security bonds of designed maturity periods
• These deposits will attract a one-time tax at progressive rate
Phase 1: First six months:
• Withdrawal of central government taxes like personal income tax, central excise, service tax, etc.
• Withdrawal of Rs 1000 notes
• Rs 500 notes to be supplied in calculated additional numbers
• In lieu of the withdrawn taxes, a fractional bank transaction tax, say 0.55 per cent to come into effect. (Breakup: 0.5 per cent to Central government account and 0.05 per cent to the banking system for setting up the required tax collection mechanism).
Phase 2: Next six months:
• Monitoring revenue generated through bank transaction tax
• Negotiating with / counselling state governments to withdraw all state and local government taxes assuring say around 25 per cent rise in their current tax revenues via their share in the bank transaction tax, based on actual bank transaction tax figures
• Fixing the bank transaction tax percentage to generate required revenues for central, state and local governments in lieu of withdrawn taxes
• Withdrawal of 500 rupee notes
• 100 rupee notes to be supplied in calculated additional numbers
Phase 3: Next six months:
• Complete transition is put in place and monitored meticulously
• Withdrawal of 100 rupee notes
• 50 rupee and lower value notes to be supplied in calculated additional numbers.
What other measures would you prescribe for strengthening the national economy?
Apart from systemic correction on the revenue side, ArthaKranti has put forth two proposals on expenditure side: empowering democracy and blanket social security. These proposals are available on our website.
suman@businessworld.in; @skjsumankjha
BW Reporters
Suman K Jha was the deputy editor with BW Businessworld
