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5 hard decisions Modi could announce to back demonetisation

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S Murlidharan
S MurlidharanDec 26, 2016 | 14:05

5 hard decisions Modi could announce to back demonetisation

Prime Minister Narendra Modi has warned of bad days ahead for the "dishonest" and better days for the common man. The net-savvy and those acquainted with electronic payment services in urban areas were never seriously threatened by demonetisation in the first place, except that some of them joined the queue aroused more by the herd-instinct than the real fear of cash passing them by. 

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However, rural areas and the unorganised sector have indeed been unsettled and many of them put out of business by the cash crunch. While they may heave a sigh of relief come New Year, the "crooks" could feel the heat of some of the following measures hot on the heels of demonetisation:

1. The opposition has already declared demonetisation a failure on the touchstone of "bad" notes pouring in. The near 100 per cent influx of demonetised notes into the banking system makes them cocky with an air of "I-said-so".

For them, only a hefty chunk of "bad" notes not exchanged or deposited would have constituted success because to that extent the RBI’s liability would have stood reduced. But Modi will have the last laugh if the amnesty scheme, Pradhan Mantri Garib Kalyan Yojana (PMGKY), finds sizeable adherents. Remember 50 per cent of the amount declared under the scheme will find its way into government coffers by way of taxes. His finance minister has already given a hint — repeat deposits in the same bank account are an indicator of black money pouring in. 

Fearing a probe, those who blithely deposited multiple times into the same account are bound to buy peace and participate in the scheme, especially if they have a troubled conscience. He could go a step further and freeze accounts into which more than Rs 2.50 lakh worth of "bad" notes has been deposited pending assessment after inquiry or participation in the PMGKY.

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Prime Minister Narendra Modi has warned of bad days ahead for the "dishonest". (Credit: PTI photo)

"Crooks" who gave the government a slip by laundering their black money through back doors of the banks would in all probability stop doing so and being so upfront about it — transfer of funds to friendly bank accounts by issuance of cheques or NEFT.  They could well stand frozen in their tracks. Thus, immobilised they could well raise the white flag and participate in the PMGKY. If the opposition dubs this measure draconian, so be it. Modi will not let "crooks" pull wool over his eyes twice after having gotten away with new notes by greasing the itchy palms of bank managers.

2. The benighted Jan Dhan Yojana account holders may be rewarded for exposing the "crooks" who have used them as benamis. While it is true that the Prohibition of Benami Transactions Act, 1988, does punish both the parties, the Modi government might offer them a one-time amnesty for turning approvers in view that their innate perceived gullibility and instead give them a 10 per cent reward for exposing the real owner. 

If excise officials can be rewarded for doing their duty in arresting tax evasion, there are stronger reasons to offer incentives to the late converts to the tribe of whistleblowers. The full force of the benami law could be brought to bear on the "crooks" whose balance in Jan Dhan accounts may be confiscated in addition to sending them behind bars for up to seven years.

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3. Cooperative banks hitherto have been coming under the weak and feather-touch regulatory oversight of the RBI with state governments exercising more substantial powers over them. It's little wonder they have been perceived as playing ball with "crooks", especially the ones commanding political patronage. Deposits of "bad" notes in cooperative banks will most certainly be subject to microscopic examination by taxmen. States may be persuaded to yield some ground in terms of regulatory powers in favour of the RBI.

4. Budget 2017-18 will most certainly encourage digital payments in addition to the rebates announced by petroleum companies and public sector insurers etc.  The presumptive profit of just 6 per cent for making and accepting payments digitally as opposed to 8 per cent for others both clocking a turnover of Rs 2 crore or less per annum is the harbinger of things to come. The salaried class could smile not only on account of lowering of tax liability, but also on account of the tax rebates to be generally conferred on those making digital payments.

5. Political parties could be mandated to accept donations only through banking channels. This single move could send Modi’s stocks sky high coming as it does on the back of the daring demonetisation exercise on a scale never attempted before by any nation. The present leeway given to anonymous cash donations up to Rs 20,000 is too high says the Election Commission. The leeway should be only Rs 2,000, according to it. But it hasn’t occurred to it that Indians take a yard when given an inch. That won't daunt our indefatigable political parties. Only zero tolerance of cash and anonymous donations would.

Modi can be counted upon to bite the bullet. He would, however, cynically take a leaf out of Tamil Nadu politics where money power doesn’t matter as much as the ability to bribe the voters with freebies at the government's expense. 

Last updated: December 27, 2016 | 19:39
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