D-Day and after

Mohan R Lavi | Updated on January 16, 2018


PM is up against a dubious ethical order

Staff of the CBI, Income Tax Department and the Anti-Corruption Bureau are probably having the busiest times of their lives now. Soon after the 8/11 announcement by the Prime Minister on demonetisation, raids are being conducted in every nook and corner of the country to weed out black money and curb misuse of the limitations imposed by demonetisation.

The PM announced on the ‘D-Day’ that the primary purpose of the demonetisation drive was to stop terror funding, prevent fake currency and stop black money hoarders in their tracks. While there is no information on the achievement of the first two objectives, it is becoming clear that the announcement was a cue for the investigators to commence their raids on black money hoarders.

Demonetisation innovation

The fact that Indians can innovate even in times of extreme hardship is being seen on the ground. The methods by which some are attempting to defeat the demon of demonetisation are eclectic. In the first few days, many simply threw or destroyed tainted currency. Later, emotions stabilised and people exchanged old notes for the fresh bunch at a huge discount on the logic that legal cash is better than abandoned illegal cash.

As days went, other techniques were innovated. One entity used its old cash and asked their banker to draw Demand Drafts in favour of a popular finance company. A few days later, they cancelled out the drafts stating that the transaction could not go through and took a portion of the refund in the new currency. The same entity has also been charged with misusing a Jan Dhan account to change the colour of his cash. In Bangalore, the driver of a van which was being used to transport cash to banks escaped with the van and cash at an opportune moment.

While some have handed over their tainted cash to cash-heavy businesses (who return 50 per cent of the money in new notes, pay a 30 per cent tax on the old notes and still profit by 20 per cent). With so much action on the rupee, some have chosen to convert their old notes into foreign currency. Gold has come back into the limelight as an alternative to tainted currency.

Change in culture

Overnight, the Prime Minister has attempted to change the culture of a certain section of the population of India. This sect of the population has a certain set of mistaken value systems; they feel they can manage either because they are very well connected, or because their higher-ups have the same value systems and are thriving.

Changing this culture is going to take a lot of patient effort. Regulatory raids may not be the best way to change this culture because it is embedded in their psyche that those conducting regulatory raids are deemed enemies against whom a war has to be waged at any cost. They also feel a sense of injustice since they are of the opinion that the big fish can get away with any currency.

Though a beginning, the Prime Minister’s decision to ask all his Ministers to submit their bank accounts post D-Day is a tepid attempt. If the Government is able to take tough decisions in its own backyard and make a couple of big-ticket changes, those below would seriously consider changing their value systems.

Even in politics, the tone at the top matters.

The writer is a chartered accountant

Published on December 13, 2016

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