“Financial Emergency Avoidable”

Standing committee on finance chairman and former Union minister M. Veerappa Moily tells BW Businessworld’s Suman K. Jha that Prime Minister Narendra Modi’s demonetisation measure had not gone down well with the majority of Indians. “ We are questioning the process,” he says.

Excerpts:

How do you view the government’s decision to demonetise part of the currency?
The demonetisation process has been set in motion in the crudest way. Nobody can find fault in the instrument, but the manner in which it has been done, is appalling.

We should understand that 28 per cent to 30 per cent of the country has access to financial institutions, including post offices and banks.

Even after introducing the Jan Dhan (Yojana) about two years back, 90 per cent plus people have zero balance accounts. So 33 per cent of our total banks are in the 60 Tier 1 and Tier 2 cities, putting rural India at a greater disadvantage.

Among other things, the rupee has crashed. You know that in the last two years, we have had severe droughts and in the third year, we have a good harvest due to good rains.

Farmers were looking forward to better days and retailers were looking forward to better days. But all of them are shell-shocked. This (demonetisation of nearly 86 per cent of the currency in circulation) is particularly disastrous for the rural economy.

Will the Standing Committee on Finance consider taking up the demonetisation issue?
We may take it up. We are entitled to take it up on a suo moto basis. Maybe in our next meeting I will get a sense of the committee and then take a decision.

You have come out with a report on the black economy. So, what measures must the government take to unearth and tackle black money?
There are several instruments. First of all, you should have institutions to deal with them and you know that the Benami Act that has just been passed, can be implemented. There are several other income tax measures and instruments... and we have the Money Laundering Act, which is available as an instrument.

Corruption money is a big contributor to black money. So, what are the institutions we have?
Every state Lokayukta institution have been neutralised, which includes Gujarat during Modi’s own tenure (as chief minister). The Lokpal Act has been passed long back.

As a law minister (of the UPA government) I had about eight national consultations all over the country. We went around and had discussions everywhere, to come out with electoral reforms. The main focus has to be on political funding and an Act on this should have been expedited. It should have been introduced before a big election, like the Uttar Pradesh elections. Had that been done, 50 per cent of your black money could have been tackled.

The Prime Minister has suggested state funding of elections. Do you agree with the idea?
We have discussed it. There were a lot of discussions going on with the political parties. It was the BJP which had not come forward with the proposal with the Election Commission of India.

After a national consensus was achieved in the country, we gave a very good recommendation and formulated a Bill in the law ministry during the tenures of UPA I and UPA II. Then we came out with the legislative base, which they should have pushed up. They did not do it then. They have not done anything on taxation or the litigations on taxation either.

The genesis of the problem, as many say, lies in the fact that most of the contributions to the parties including the BJP and the Congress anything below Rs 20,000 goes without people getting to know who is contributing to that party.

Don’t you think this needs to be addressed?
First of all, you should bring in the legislation. That is the way to handle it. After getting the consensus, let him (the Prime Minister) bring in the Ordinance. The Congress is here to support it.

Should the instrument – demonetisation – be supported, even if the manner in which it was implemented was crude?
How can you support the manner in which it was done? We are questioning the process. Now there is no money.

This cannot happen in any country. On demand you have to pay because it’s a legal tender. So that way they have failed. I think this will create a trust deficit. You have created a panic situation and will have to pump in more money than required. It was not required.

Many parties are arguing that it should be undone. So, do you support that demand?
This government and Prime Minister Modi, lack institutional memory (necessary) for national governance. We have that. Congress has taken a very responsible step.

What kind of measures do you think the Modi government should take immediately?
All this rhetoric should stop. The government should get into the governance of it and (focus on) how confidence could be restored in the minds of the people.

Financial crisis and emergency is not desirable. So, this should cool and come down. Concentrate on the governance. The availability of the cash, should be the (government’s) topmost priority.

suman@businessworld.in, @skjsumankjha