Is India's fight against black money a political game?

Critics smell corruption in Modi's anti-corruption drive.

By Ajay Kumar Singh
Bhubaneswar:  When Prime Minister Narendra Modi announced his decision to withdraw high value bank notes overnight on Nov. 8 he called it a "masterstroke" and "game changer." But many now wonder if the Indian population have been made to suffer for Modi's political benefit.

He appealed to the people to sacrifice a little inconvenience for two days and help destroy terrorist's funds and choke the black market. But it has been far more than a little inconvenient.

The chaos and struggle of the poor continues, especially in the villages as they struggle to change their high values notes to smaller ones. Within a week of the announcement at least 33 people died directly or indirectly due to the struggle to get cash.

There are stories of poor people committing suicide out of frustration as they could not manage their expenses; sick people dying while their attendants and relatives stand in long bank and ATM queues. Anger and frustration is mounting as Modi's promise falls apart.

The move was tough for India's cash-based economy where the devalued banknotes of 500 and 1000 rupees constitute 86 percent of the cash in people's hands.

The majority of Indians, such as farmers who constitute at least half of the 1.2 billion population and small-time traders, depend on cash in a country where banking is a relatively new phenomenon.

Studies show that only 53 percent of Indians have bank accounts and 40 percent of them are dormant. That shows the scale of India's cash economy.

While de-valuing the notes, the government also issued a re-designed 500 rupee note and introduced a new 2,000 rupee note. On the face of it, the move looked like the best way to choke fake currency, black market stashes and tax evasion.

But with no added security features, fake 2000 rupee notes began to appear in several parts of India within a week of them appearing in the market. Fake notes were also found with terrorists who attacked the Indian army on the India-Pakistan border, reports said.

Senior Indian economics like Kausik Basu have said that a major chunk of India's black money is invested in real estate and gold. However, the government has announced no plans to bust these pockets of illegal funds.

The fight against black money was a campaign platform that Modi used in the 2014 national elections. He promised to bring back to India money that India's rich and famous, including politicians, had stashed away in Swiss banks. But, after two years in office, he has not yet fulfilled his promise.

He can't actually go after the black money in Swiss accounts because a lot of it belongs to the people who propelled him into power as well as those who sanitized his image from that of an anti-minority politician to a development-friendly statesman.

Even so, he has been keen to keep up his image of an anti-corruption crusader. He needed to divert the issue away from the black money stashed abroad to that stashed at home.

The United Nations Development Program (UNDP) in its Human Development Report 2015 said that 80 percent of Indian women do not have bank accounts. The banned notes are reported to account for 86 percent of all the cash in India.

In the past years, despite best efforts, cash recovery has been less than six percent of undisclosed income seized from tax evaders, according to a report in Hindustan Times. So it seems this move will not end black money.

Banks received 2 trillion rupees or roughly $29.8 billion within a week of the government announcing the withdrawal as people, mostly poor and middle class, queued up to deposit or exchange their old bank notes.

This helped banks who were reportedly running short of cash and sinking in at least US$17 billion of bad debt. Media, especially social media, say the more cash the banks have the more they are able to write-off corporate debt. The same companies that helped Modi to his present chair will benefit when their bad debts are written off.

The State Bank of India has already written off 70,000 million rupees (more than US$1 billion) of unpaid loans from 63 willful defaulters, including industry tycoon Vijay Mallya's now defunct, Kingfisher Airlines.

Mallya has moved out of India and now leads a posh life in England. Invalidating bank notes was a trick of the government and the Reserve Bank of India to take money from the pockets of ordinary Indians to pay for the luxury life of the rich.

In the fight against black money and corruption, Modi's government is also silent on political parties. It is estimated that over 75 percent of the money that political parties use for electioneering is unaccounted for. But the country still has no law to investigate a political party for corruption.

The move is aimed at the 2019 state election in Uttar Pradesh, a key state politically. Modi wanted to drain funding from rival parties who rely on donations from government employees and small-time vendors.

The move on bank notes is a well thought out political strategy to eliminate Modi's

political rivals. However, for single parents, children and vulnerable people, the assurance of ending graft is nothing but a political drama.



Ajay Kumar Singh is a Catholic priest and human rights campaigner based in eastern Indian city of Bhubaneswar.

Source: UCAN