Hon. Chairperson, Sir, the
Modi Sarkar itself has accepted that demonetization has had a severe negative
economic impact because in the list of achievements mentioned in the Economic
Survey released on the 31st January by the Chief Economic Adviser, they
have mentioned Aadhar, GST, FDI, UPI, but there is no mention of demonetization.
In fact, Aadhar, GST, and FDI are all Congress initiated programmes. So, I want
to accept the Prime Minister’s invitation this morning that we will happily
take credit for the few good achievements of this Government. The Modi
Sarkar also accepts – and I am quoting from Chapter III of The Economic Survey
– that demonetization resulted in slowing growth; demonetization reduced
demand, cash, and private wealth; it reduced supply, liquidity and working
capital, disrupted supply chain, increased uncertainty – and I am still quoting
– job losses; decline in farm140 income; social disruption,
especially in cash incentive sectors. So, I would commend to the Finance
Minister Chapter III of his160
Economic Survey as my indictment of his Government.
The Prime Minister has been talking
about the surgical strike on black money, corruption, terrorism, and
counterfeiting but it is very clear that these objectives have not been met. A
surgical strike is always precisely targeted but here the collateral
damage is so extreme that the pain inflicted has outweighed any tangible gain.
But what was the gain? Let us take black money for example. The estimate was
that many people – rather than attract the attention of the law enforcement
authorities and the tax authorities – would not return their money but would
destroy their black money. Various agencies estimated that around 25 per cent
to 30 per cent of the specified bank280 notes would not be
deposited by the stipulated date. On November 23rd, the Attorney General of
India told the Supreme Court that the Government expected that SBN worth Rs. 4
lakh crore to Rs. 5 lakh crore would be rendered320 worthless
on account of not being deposited but what happened? It seems that our black
money hoarders have found creative ways of laundering their money and the
result is that most of the estimated black money in circulation – these Rs. 4
lakh crore to Rs. 5 lakh crore – that the Attorney-General mentioned has
flooded into the banks.
It seems that some well placed
friends of the Ruling Party may well have been allegedly tipped off because the
well-connected were clearly able to unload their money; none of them seemed
terribly troubled by the November 8th announcement. We do not know,420
of course, how much has come in because the Reserve Bank has not given official
figures but it has been widely reported that by the end of December, 95 per
cent to 97 per cent of the money in circulation has already reached the banking
system. If that is so, after leaving out the small amount being held by the480
Central Banks of Nepal and Bhutan and by NRIs, it looks like utmost you would
have two per cent or three per cent of all the demonetized specified bank notes
undeposited. We cannot forget the primary objective of cleansing the economy.
In fact, the RBI Governor has himself conceded that there is no impact at all
of demonetization on the RBI’s balance-sheet and there may be no liability
write-off at all. The Bill’s purpose is to extinguish the liabilities of560
the RBI but none have been reduced. As we all know, all cash is not black money
and all black money is not cash; most of it has been invested in real estate
and other property, gold and jewellery, investments abroad, and round-tripping
that has seen the money return to India’s stock market as foreign investment
from countries like Mauritius.
The Prime Minister, this
morning asked, ‘Yes, that is true but when did you know it?’ Let me say that640
we have always known it. This Party and the UPA Government have openly said it.
I have myself said that in two different black money debates in this very House
in the last six years. So, the fact is that the Government should also have
known it. So, why did they make a scheme that only touches such a small700
proportion of the black money assets that those people are holding? Worse, in
the six weeks after demonetisation, the Income Tax Department announced
that it had seized Rs. 500 crore in unaccounted cash. Strikingly, Rs. 92 crore
of that black money happened to be in new notes! So, what is going on? We are
finding cases of corrupt officials including bank managers being caught
red-handed in illegal transactions. Some bank managers were sitting in their
banks from nine a.m. to five p.m. , telling people they had no money;
but from five p.m. to 9 p.m. , they were giving money out800
of the back door, to those who could launder it. I want to say that though I am
by no means tarnishing all the bank managers for the sins of a few, the fact is
Mr. Finance Minister, that in840 your drive against
corruption, you have created new forms of corruption. Black money continues to
be generated clearly; it has merely changed colour and shape. Black money has
become white by way of pink and of course Rs. 2,000 notes will take up less
space in the launderer’s brief-case than the Rs. 1,000 notes did. We all know
that we can withdraw notes, we have withdrawn in the past series of notes
saying that those before 2005 were made illegal in 2014. You do not need to demonetize
for such an exercise. You print new notes and phase out the old. If you are
going to print new notes then you have to have strong security features
enmeshed with the960 design in order to prevent
counterfeiting. But it seems the Government has missed the opportunity
to put incredible security features980 in the new notes it
has launched post-demonetization because there is no new water mark, no
new security thread or fibre, no new latent image and certainly no nano-chip as
BJP supporters were boasting on Whatsapp. So, will a mere change of colour and
size make them safe? Shockingly, RBI has admitted that three different versions
of the 500 rupee note had been printed in haste. If all the three versions are
authentic, is that not going to confuse the public and make it easier for
counterfeiters to get away with their own fake versions?
Mr. Chairman, how big a
problem is this counterfeiting? The Prime Minister mentioned it on November 8
but if you look at the statistical facts of the Indian Statistical Institute,
Kolkata under the supervision of the Government’s own National Investigation
Agency, the estimate of fake1120 currency notes in
circulation is only 400 crores or roughly 0.03 per cent of the currency
withdrawn. It also indicated that the ability of banks to prevent these notes
being deposited was limited because of sudden deadlines, sudden announcements,
short deadline, lots of money flooding in, they could not tell us how to do it
manually. They did not have the time. So, the result, it seems according to
anecdote anyway, is that there has been a lot of fake currency slipping through
into the banking system and becoming legitimized. So, far from hurting
counterfeiters, demonetization may have helped fake currency by being exchanged
for new notes. That is the consequence on counterfeit. The study shows that
there is no cause or relationship between the number of terrorist strikes
on Indian soil and the absolute levels of currency in circulation.1260
In any case, we all are seeing reports about terrorists being caught, arrested
or shot in Kashmir possessing brand new1280
currency notes. So, how the terrorists are being affected? Instead, who has the
Government hit? Housewives, who have salted away their savings in biscuit or atta
tins, are the ones whose money had to come out and put in the bank when even
their husbands necessarily did not know how much they have saved.
Stories of individual
tragedies have been mentioned in this House; hospitals turning away patients
who only had old notes, children suffering, middle-class wage earners unable to
buy medicines for the sick. Sir, 115 people reportedly dying after collapsing
in bank queues, committing suicides, hitting each other, murdering each other
are the demonetization-related events. There is even a report in one of today’s
newspapers that demonetization has1400 led to an increase in
domestic violence cases. So, the people at the bottom of the economic pyramid
have been the real victims of this policy. I do want to say, Mr. Chairman, we
have been restricting weddings in the wedding1440 season to
Rs.2.5 lakh each but it seems if you were a BJP leader you have no difficulty
in celebrating a lavish wedding even after demonetization. The goal posts have
been shifting. Reserve Bank has issued 138 notifications in the first 70 days.
Then I stopped counting. Even the Reserve Bank employees and officers have complained
about operational mismanagement which has dented the RBI’s autonomy and
reputation beyond repair. The Governor of the RBI has been reduced to a lamb
and he is so silent. It is the silence of the lambs.
I just want to stress finally,1540
Mr. Chairman, that we are getting new objectives. The Finance Minister talks
about expanding the tax net but look at the cost at which this tax net is going
to be expanded. The Prime Minister talked about cashless economy; no cash in
the banks, no cash in the ATMs, no cash with the people. That is the kind of
cashless economy we have.1600
