Where is the black money?

Hindu claims that 11 Lakh crore (~80%) of the demonetized currency notes are already deposited over the past 3 weeks and only 3lakh crore of old notes are in circulation with another 4 weeks to go. What further infuriates me is that rather than 80+% tax on unexplained wealth that was declared earlier, the amount has been reduced to 50% (those who keep cash hoard don’t care about interest anyways). Indian tax policy is not only at the whims and fancies of a single man but also subjected to no critical political debate.

When the government claimed that 65,250 was declared as black money in the IDS (previous income tax amnesty scheme), we naturally believed 45% of this was collected as taxes. However, there would be several guys like him, who declared 13.8k crore of black money without any intention to pay even the first installment. The poor man from Gujarat did not even own a car, traveled in auto and was probably declaring this large sum out of his misguided intention to help out Modi with his statistics. Government has not released any data on how much of this 65k crore is genuine.

You may also like these articles from EPW & Economist as well. The gist is:

Of the thousands of IT department raids over the years less than 5% of the assets recovered are in form of Indian currency. (remember the raid at Jayalalithaa’s house in 1996, almost everything was in 28kg of gold, 800kg of silver, 10,500 saris, bangles, footwear etc. but very little cash.)

Second was the parallels with USSR, North Korea and Myanmar and how large scale demonetization was a failure there. However, personally I felt a little offended by comparisons with these three mighty economies. The only reason there is still a popular support for Modi’s demonetization is because of the politicians, agents & crony businessmen flaunting their wealth while the country is robbed. Indians love penance and hardship even to the point of futile labor. They are hoping that government will muster a war-chest through seizures and will be able to improve infrastructure, facilities and develop a new India.

However, one should realize that black money is not the root cause for every evil & misery in India. Also without serious reforms & policy changes there will never be any permanent solution to corruption & black money.

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