Chairman of Parliamentary Standing Committee on Finance and senior Congress leader Veerappa Moily is unhappy with the Centre’s announcement of demonetisation of ₹500 and ₹1,000 currency notes. In an interview to BusinessLine , he said Prime Minister Narendra Modi’s intentions are not pure and said it seems that a second term for Raghuram Rajan was denied to accommodate such “populist” measures. Excerpts:
The Finance Standing Committee had given a number of reports on dealing with black money. How do you view this latest move of the government?
This is an impure move with a political purpose. Any economic decision will have to be based on economic criterion — what is good for the country’s economy. It should not be an instrument for political purpose. Such a decision should not be taken just because the PM wants to enhance his prestige in Uttar Pradesh and in Punjab ahead of the Assembly elections.
In 1946, the British experimented demonetisation of some currency notes. In 1978, the Morarji Desai government again made such a move. But, within a month he withdrew it. The decision had a disrupting effect on the economy. People brought back Indira Gandhi to power in 1980 with a thumping majority. I think Modi’s decision also comes from the same mentality as that of Desai. He started his address by speaking against the previous government. Also, Modi presumes that our economy is good. Economy is good only in his speeches. No jobs are created in the manufacturing sector. Exports have not improved. Timing was really bad. He just wanted to please some international crediting agencies which have rated us just above the lowest. He thinks by mere slogans, he can win elections.
What will be the impact?
Everybody is afraid. Investors are frightened. Everybody has become a suspect in the eye of the government. A domestic servant with a ₹500 note is a suspect now — either you are financing a terrorist or you are hoarding black money. You cannot run a government with that kind of a suspicious mind.
He should have taken people into confidence. He is demolishing system after system. He has already demolished the Planning Commission. He has undermined the Parliament and its panels several times. Now he is trying to diminish the stature of RBI. If the institutions fail, democracy fails. This decision will have a long-term impact. Politically, it will have a demoralising effect on this government. The Rabi sowing season has just started. The decision will badly impact the farmers. They are still dependant on private lenders and micro financers.
How do you explain your comment — undermining the RBI’s powers?
It is totally unprofessional move. It smacks of economic impropriety. There is a committee already constituted with government representatives to monitor the functioning of the RBI. They are already encroaching on the functions of the RBI. It gives an impression to the people that Raghuram Rajan was removed just to accommodate such populist and political measures.
The government now interferes in everything. Investment proposals are vetted by the government. Every proposal has to be cleared by the Vigilance Department or the CBI. Bankers should be allowed to take professional decisions.
The manner in which they are appointing chairmen and managing directors of banks is absolutely unknown in the history of the banking industry. That is precisely why NPAs are not in control. We have pointed out that in our reports.
Will this help controlling black money?
Black money, Modi said, is stashed away in other countries and he will bring it back. But, not even a single step has been taken. Shah Committee was appointed by us, but he took the credit.
Let him take credit. But, what is the result? Shah committee has given its report. Nothing has been done on it. Declaration scheme failed. Either there is no black money to the extent which he is claiming, or he is not enforcing law.
Penetration of the banking system is just 20 per cent. You are ideally thinking of a system with paperless money transactions, plastic money. Is it going to happen in the country, so early? Unless the economy is matured enough, radical reforms cannot be brought in.
There are other measures to curb corruption. We introduced RTI, integrity pacts, Benami Act, MGNREGA, direct transfer of subsidies and other measures to ensure transparency. But this government is not keen to follow such Acts. Lokpal Act has been passed, but Lokpal is yet to be constituted.