Cash Cleanup: How India Can Come Out Stronger

It has been three weeks now since Prime Minister Narendra Modi declared the so far highest denominations of Indian currency invalid. I hope businesses and private individuals will recover from the initial stress and difficulties within a month or two, but it may take longer. Politically, this was a risky move for the government. They were aware of that, and consciously took this step. One of the main purposes of this measure is to curb counterfeit currency. I would say the percentage of counterfeit notes in India is much higher than the RBI estimate of two hundred fifty in 10 lakhs or 0.025 per cent. The fake banknotes are not done by some dingy printers but in proper mints outside India. Apparently, a few years ago, the same note presses that we commissioned to print our money also produced counterfeit Indian notes. These fake notes were so well done that sometimes even banks cannot identify them as counterfeit.

Another aspect of the measure is to address the black money problem, which I think will be effective only to some extent. Maybe 25 to 40 per cent of the black money can be retrieved like that – the rest of them will find some other ways. Unfortunately, nearly 50 per cent of the day-to-day business transactions in this country have been conducted below the radar of the tax authorities so far. At least 30 to 40 per cent of our shadow economy will become part of the official economy now.

Bringing these earnings on the radar will allow us to show our economic strength in the comity of nations, which is important. This means what used to be a two-and-a-quarter trillion dollar economy will suddenly become a three trillion dollar economy. It is high time we as a nation get our act together. We have to go through this temporary hardship to set India’s economy on a more stable basis for it to blossom. This requires that our economic transactions are properly recorded and taxed.

There has always been business in India. And right from the times of kings, there were taxes. When the British came, they called the district administrators “Collectors” because their only work was to collect taxes – not to render any service to the public. It is unfortunate that to this day, we have retained the same terminology. For generations, we have been thinking that if you avoid taxes, you are smart. This idea of giving a share of the money that you make to the government has still not sunk in. This is not out of criminal intent – people just have not internalized the concept of paying taxes to fund public services. They think the way to do their bit is to donate to a temple, the poor, or an orphanage. This is why until now, the nation has been just geographic entity with different communities. Within their own community, people may help each other, but oftentimes not beyond that.

There are people who are sitting on thousands of crores of rupees because they think money is some kind of a commodity that they need to store. Money is not a commodity – it is only a transactional tool. A transactional tool must be moving, rather than staying in one hand. Apart from that, many people in this country think that it is all right to break the law. Mentally, we are still stuck in pre-independence times when breaking the law was heroic, nationalist, and visionary. Mahatma Gandhi did it with great élan and expertise – rasta roko[1], hartal[2], bandh[3], and so on. For a long time, we were an occupied nation where the administration was against us. Consequently, those who broke the law were our heroes. This attitude and approach was necessary then, but it is time to understand that those days are long gone. We are still in a mode where we essentially want a king. We want to eulogize a human being to such a level that he himself becomes an institution. If you look at public life today, it is amazing how people of a certain status and position in society can go on television and tell absolute lies in front of the camera. Even as they speak everyone knows it is a lie, but still they get away with it. If someone is intentionally trying to mislead the public, they must be gone the next day. But out of their personal charisma, they have a large following, which enables them to say whatever they want without being called to account. We have to do away with such things if we want to move ahead.

We need to make everyone understand that the nation is not just a geographic area we live in – it is an institution. Within this institution, there are laws to be followed, there are contributions to be made, and there are benefits to be reaped. If we as citizens do not receive the benefits in the form of infrastructure, services etc., we have the right to demand them. We have the right to ask where our money is going. Right now, we are neither contributing, nor are we demanding. This has not occurred to us so far. We never thought the government is responsible for providing services, nor that we are responsible for providing money for the government to function. If we want our nation to function effectively, we need everyone to contribute. And we need clear-cut laws that everyone must follow. Simplification of laws and bringing an unambiguous understanding of law to all citizens of the Nation is the need of the hour.