Beyond silencing critics Demonetisation decoded
With reference to “Demonetisation: Evaluating the critics” (November 13) by Arvind Panagariya, the article was necessary to dispel the misconceived notions about the effects of demonetisation, but it is not sufficient to silence all its critics. Critics who have objective doubts based on their data would consider the author’s comments as an impetus to review their inference.
However, most of critics are politicians and economists for whom everything that Prime Minister Narendra Modi does is questionable. They would need more proof. This would come or not come, depending on the follow-up action that the government takes, and takes persistently. Thus, the government has claimed in a recent advertisement that 17.73 lakh cases of cash deposits did not match the tax profiles and that cash deposits of ~3.68 lakh crore from 23.22 lakh accounts were suspect. Quick pursuit of these cases by the tax departments, beginning with high-amount accounts, would help in acknowledging the government’s resolve. Similarly, quick action in accordance with the bankruptcy code and hot pursuit of high-value benami transactions are required — particularly in real estate in big cities.
It will be the speed and objectivity with which the central government prioritises and pursues the cases of suspects with high stakes that will convince the people also. The income tax department and other agencies in charge of collecting dues will have to be staffed by honest officials so that delays do not contribute to protecting the corrupt. Speed and timing is crucial from the political angle also. The poor and the middle class have tolerated the inconvenience and loss of earning caused by demonetisation because of the promise for fair returns to them in the form of various benefits. If the government fails in this regard, the political cost of demonetisation will be very high. Y G Chouksey Pune With reference to “Demonetisation: Evaluating the critics” (November 13), Arvind Panagariya has beautifully dissected the claims and counterclaims of the effects of demonetisation on the economy. In fact a few of the claims are a misnomer created by groups with vested interests. One such misnomer was that since most of the cash has been deposited in the banks, there was no black money left. Panagariya has very lucidly explained the process, the true after-effects of which may take a couple of years to reveal, and the remedial action by the then government. By deregistering 224,000 companies and disqualifying 309,000 directors the government has simultaneously cleansed the offices of the Registrar of Companies. This will, in the long run, increase the efficiency in the offices of the ministry of corporate affairs and stop the practice of fictitious transactions that are resulting in thousands of shell companies.
As regards the loss of two per cent of the gross domestic product (GDP), Panagariya has rightly explained that the real benefit of sustained low prices of crude, and consequently low value addition in petro-products and exports thereof was felt in 2016-17 on the full year basis. So much noise was made of 5.8 per cent growth in GDP for the AprilJune quarter, a slight decrease as compared to the trailing quarter. It should be seen as the activity for only two-and-ahalf months as manufacturing activity took a back seat in view of the de-stocking before the implementation of the goods and services tax from July 2017.
As regards the loss of 1.5 million jobs, the less said the better. There is neither reliable data nor the right definition for the various types of job, the statistics for which are available with the Indian Statistical Organisation. The present government would do well to organise/restructure CMIE, ISO and also synchronise them with the National Population Survey, the figures from which are available as of 2011 only. A reliable data on jobs and employment is the need of the hour as an indicator for any economy.
Naresh Saxena New Delhi