Environmental take-aways from demonetisation

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Prime Minister Modi’s demonetization has been roundly criticized on various counts by politicians, economists, social organizations and general public. The abrupt ban on the two high value currency denominations of Rs. 500 and Rs. 1000 caught the people by surprise and many of those who had stashed away sizable hoards of them were naturally the first to raise an outcry in opposition. True, the proverbial common man, the aam aadmi, was put to a lot of inconvenience, having had to stand in queues for hours in front of banks or ATMs for cash, sometimes repeating the same process on succeeding days. They had the best reasons for criticizing Modi’s move; but it was not they who, though suffering its consequences, criticized it as most of them realized it was a good way to catch the corrupt and the unscrupulous black money barons.

That the political opposition criticized the measure was understandable but many intellectuals, especially the economists – well known or not so well known – also found it amiss. The former economist Prime Minister Dr Manmohan Singh called it a “monumental disaster” and said that the GDP would take a hit of 2 basis points. Others said that the poor, daily wagers and farmers would be hit rendering them jobless as most of their transactions were in cash. And yet it would, they said, hardly make any dent on those who had the dirty money.

All that and much more can be elaborated and dilated upon but not many ever looked at the gains of “note-bandi”, as demonetization has since come to be known as. One finds that a massive take-away from demonetisation was that those who, despite having had opportunities, shunned illegal wealth and found virtue in being ethical and honest.  Even it found resonance with the Finance Minister who said the measure accorded a semblance of dignity to them.

 That was, however, for the people but there was something greater for their physical environment as well. Soon after the measure was announced headlines in newspapers screamed cash crunch “brings auto industry to a screeching halt”, auto industry faces “30% drop in November sales”, “auto sector for a rough phase” and so on.

On the face of it, the harsh impact on the sector may look unfair. After all, in the 1990s it was on the auto sector that the economy took a ride to some spectacular growth in the new century. But then it grew so much that it became something like a Frankenstein, threatening the very people for whom it was to work for. The reforms, in due course, created an upsurge in the middle classes raising their standard of living and aspirations that generally centred around an automobile and a house – both of which everyone coveted.

The banks fed the market with cheap loans and before one realized what was happening there were far too many automobiles choking and clogging urban India, emitting tons of carbon into the atmosphere with all its lethal components threatening the lives of everybody around. The expanded market attracted manufacturers from almost all European countries and the US as also from Japan and Korea.

Before the 1991 reforms the country used to produce passenger vehicles only in thousands, today it produces them in millions (2.8 million by the last count in 2015). This apart 16 million two wheelers were also manufactured. It has been a great jamboree for the middle classes, fed as they were by the saying “have money, buy car”. Families that had space for only one car and, maybe, a two wheeler had half a dozen cars – some of them spilling over to the public spaces, narrow lanes, colony roads. While jams became common even in tier 2 and tier 3 towns, providing parking spaces became a mammoth problem for the civic bodies.

 The urban air went for a toss leading to diseases and deaths. The black economy has had no mean role in boosting up of this sector by fostering demand for the highly polluting diesel-driven SUVs that rule the roads. With a check on this sector, hopefully, Indian urban air will be somewhat cleaner enabling citizens to breathe easy. Thankfully the government is also in the process of framing laws to inhibit reckless purchases of cars – a measure that will be widely welcomed.

Another Sector that has taken a hit because of demonetization is the realty sector. Reports say housing sales dipped 44% after demonetisation. This is one sector which was pump-primed by black money and has, therefore had a swift fall – if not permanently, at least temporarily. This is the sector in which most of the illicit wealth is invested; this is where the action is. Here there are endless opportunities as it, by itself, generates black money. Ministers and bureaucrats are indulgent in handing out building permissions and all, together with the engineers and contractors, partake off the pile. Everyone knows what kind of games the politicians play with wealth so generated.

The urban sprawl has, therefore, been marching out in almost all directions of most of the cities gobbling up farmlands, forests, wetlands and their catchments or whatever comes in its way. While this has been largely responsible for damaging the urban environment, it has also, in many cases, exposed the inmates to nightmarish insanitation and filth. The civic bodies, already stretched to provide necessary services, have abstained themselves from such unplanned rapid urban expansion.

 Most of the expanding fringes of the Indian urbanscape draw underground water in the absence of the piped municipal water. Thus, while levels of underground aquifers dip there is very little scope for their recharge, given the ceaseless drawal and the increasingly truant monsoons. Depletion of sub-soil water threatens water security as well as the over-ground greenery – the trees that sustain the environment and mitigate air pollution as well as harsh impacts of unkind seasons.  

 Fallout of the uncontrolled urban expansion has been creation, like in China, of over-capacity in housing. Noida or for that matter, Bhopal have reportedly recorded over-capacity with thousands of units awaiting buyers. And yet Awaas Melas are held in Bhopal where green hills, farmlands and wetlands have been colonized. It is the illegal money that fed the real estate boom in their unplanned growth leading to civic mayhem and chaos. Stripped of black money the sector should cool for a while and in the meantime the government could move in to restrict urban growth drawing up “Urban Growth Boundaries” like they do in the US. If that were to be done the increasingly degrading environment around cities and towns would be saved.

Demonetisation has given a push to a cashless society where financial transactions will be paperless and carried out electronically. Modi has been promoting, even incentivising cashless transactions even in rural and semi-rural markets. This will surely reduce the need for cash, which in any case, is currently in short supply. With less cash, there will be lesser need of paper for printing currency. A report recently said that as the local sources were not able to provide paper for the need to replenish the diminished cash in the system 16 million tonnes of paper was going to be imported. With the likely proliferation of electronic transactions the demand for this kind of specialized paper will surely fall and that will be a gain for the environment on the one hand, savings for the government on the other.

If “notebandi” is successfully taken to its logical conclusion, with certain administrative measures people are likely to have a more hassle-free life, led in an environmentally cleaner India.

19^th January 2017

Demonetisation :: Pak's sinister designs forced Modi's hands

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The e-mails had been going round and round for sometime carrying the supposed facts regarding the reasons for the sudden demonetisation but one couldn’t really believe all that was conveyed in them. True, Modi had in his election campaign assured that he would fight the menace of black money and bring back all that was stashed away in banks abroad. But, two and a half years had gone by and yet nothing was seemingly moving on that front. He was, therefore, being baited and mocked at by the Opposition inside and outside the Parliament for his extravagant unfulfilled promises.

Perhaps, they were all wrong. It seems to have always been at the back of Modi’s mind, only he was waiting for an opportune moment. What the e-mails contained was indeed alarming and, if things would have been allowed to be left as they were the country would have been in serious trouble. There is a furore over the problems created by demonetisation of high value currency notes at every level of Indian society, more so for the poor and deprived classes. But, one cannot really imagine the consequences had no action been taken on what Pakistan was plotting for economic and financial destabilisation of the country. A report in the Hindustan Times (HT) on 10^th December 2016 carried some of the facts but not all the facts of the matter. According to it, Modi had said while campaigning in 2014 in Bahraich in Uttar Pradesh on the Indo-Nepal border that he would fight the ISI designs to destabilise this country.

There was a specific reason for this statement and this was mentioned in the Hindustan Times report rather cursorily. The Police had in 2009 seized Rs. 4 crore in fake Indian currency notes (FICN) from the currency chest of a nationalised bank. These notes were supplied to the nationalised bank by none other than the Reserve Bank of India. The detection of FICN in the currency chest of a nationalised bank was a serious matter. But the newspaper did not report how it was dealt with by the Reserve Bank or the Centre. This is where the newspaper became part of the secular press as it would have exposed the erstwhile Sonia Gandhi-led United Progressive Alliance government.

The facts are contained in the e-mails that have been in circulation for some time. One did not pay attention as one thought it was probably a prank of Congress baiters. Now that the HT, an unabashed Congress supporter, has reported it howsoever cursorily, it seems the whole thing was true and very alarming and the congress government at the centre chose to put a lid on it. It did not take any action and in bureaucratic rigmarole the matter seemed to have been suppressed and buried.

This is where these identical e-mails come in which tell the entire story and the huge ramifications in India of further lackadaisical approach to this sinister design of the ISI and Pakistan government. The story of demonetisation begins 2009-10 when seventy-odd nationalised banks along the Indo-Nepal border were raided only to find counterfeit Indian currency notes and what was shocking was these were supplied by the Reserve Bank of India. That only meant that even the Indian Central Bank had been compromised and it was circulating FICN pushed into India by Pakistan. On inquiries by the CBI it was found that the FICNs were so close to the genuine currency that an ordinary mortal could not detect it. It was only some foreign labs which confirmed that those notes were fake. The minute detail that proved that those were fake currency was reportedly inserted only to distinguish them from genuine Indian currency notes.

Investigations in the matter had proved that the mischief was being done at the UK based company De la Rue from which the RBI was buying 95% of the currency paper. The company was also supplying paper to Pakistan. Blacklisting of the company reduced it to bankruptcy. Later printing of currency notes was outsourced to three foreign companies but soon there was an anonymous complaint somewhere in 2011 from officials of the Ministry of Finance who seemed to have said that it was not De la Rue alone which was compromising the security of the bank notes, other foreign companies also were doing the same. One does not know what action was taken by the government but it seems this information was withheld from the Finance and Home ministries of Government of India.

Sometime later, on Modi’s initiative in 2015 another foreign company – Louisenthal, a German company – was found to be supplying currency paper to Pakistan which was printing high quality fake Indian currency notes and pushing them into India from all directions over land and by air. The Home Ministry barred it from selling bank note paper to the RBI. Pakistan had jacked up the printing of FICN and pushed them into India with vigour and confidence that its economic and financial sabotage would go undetected.

If one goes by what Gen. GD Bakshi, a security expert, has to say one would get an idea of the extent of damage that could have been caused by unchecked infiltration of FICN from Pakistan. He says that India had around Rs.16 trillion worth of Rs 500/- and Rs. 1000/- currency notes in circulation. Pakistan was already printing 15 trillion of these notes to smuggle them into India.  Pakistan had established five sophisticated presses for the purpose. This, as Gen Bakshi says, would have “unhinged” the Indian economy with runaway inflation, steep price rise and unlimited terror funding.

In fact, under these circumstances demonetisation came rather late. Nonetheless, it came before much damage could be done. With the ban on high value currency notes frequency of terror strikes have gone down and the stone-pelters of Kashmir are out of business. Even the Hurriyat which used to distribute (counterfeit) money received from Pakistan has now invited tourists to visit Kashmir as it is fearful of losing relevance in the absence of the old and now-banned high value currency notes. Even the Pakistani kingpin of FICN committed suicide the other day finding himself in a tight corner after demonetisation.

It is unbelievable that the Manmohan Singhs, Rahul Gandhis and Gulam Nabi Azads of Congress were not aware of all these goings on. It is during the reign of the UPA-led government that the RBI was found to have been compromised. Only they did not take the serious breach of security seriously enough. Now that Modi has caught them on the wrong foot they have raised merry hell and have disrupted virtually the entire winter session of the Parliament. Even Rahul Gandhi, popularly known as Pappu, has been threatening of an earthquake were he to be allowed to speak in the Lok Sabha. He should thank his stars that Modi has been pretty decent about it and has so far not made political capital out of the then government’s inaction subsequent to detection of major security breach.

12^th December 2016

Modi goes for broke after illegitimate wealth

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Prime Minister, Narendra Modi’s demonetization of high value currency notes has exposed the rather large and bloated underbelly of our society. The shenanigans of this section of Indians in the background of the demonetization put us to shame in front of the world which has been watching the developments in the country with interest. Every country, as indeed every Indian, is aware of how our economy has had to contend with a parallel economy of formidable proportions. But its ramifications as they unfolded made most of us wonder whether most of us were crooks and had no patriotic feelings.

As Modi’s surprise announcement about demonetisation was made late in the evening around 8.30 PM on the 8^th November last one thought people would take it easy and look for ways out to get most of their unaccounted cash, if any, disposed of some way or the other next day but mostly in a regular manner. One thought the demonetization would not yield much as an opportunity had already been given to all the cash hoarders to declare their holdings on payment of minimal tax, penalty and surcharge amounting to a total of 45% under the Income Disclosure Scheme 2016 (IDS) that was run for as many as three months from 1^st June to 30^th September 2016. The Scheme yielded more than Rs. 65000 crore (Rs. 650 billion, around $95 billon), by itself an astronomical sum. But for the size of the unaccounted wealth estimated to be a mindboggling sum of around 9 lakh crore (Rs. 90000 billion, approximately $1500 billion) this was considered chicken feed. And as the prime minister had warned earlier that further action would follow if the outcome of the IDS was not satisfactory action to further squeeze out unaccounted cash was expected.

As the high value currency notes of Rs. 500/- and Rs. 1000/- were to cease to be legal tender by the midnight of 8^th November the hoarders tried most of the tricks that they could possibly use. They made a beeline that very night for the jewellers and unloaded the cash there and were prepared to get in return whatever was offered. The shopping hours, at least for jewellers, got extended and the business during those hours was reported to be of Rs. 100 crores in Bhopal alone. Many of the jewellers are going to have to answer for their indiscretions in course of time. Apart from buying jewellery the hoarders tried to buy railway tickets to be cancelled later. Enormous number of railways tickets for all air-conditioned classes were bought with the intention of cancelling them eventually. The government had to block that route of changing the colour of the ill-gotten money. That Indian attribute of “jugaad” was in full play.

From the 9^th November onwards the black money barons put all their human resources for exchanging their black cash at the bank counters. That the exchanged amount would only be of a paltry Rs. 4000/- (later raised to 4500/- and eventually reduced to Rs. 2000/-) did not really matter. Initially only the same representative was asked to join the queue in a bank over and over again with different IDs. When the authorities intervened to check this ploy multiple representatives were mobilized to exchange the cash at different locations. For all their labours the representatives got a petty commission but they were clogging the banks to the detriment of genuine exchangers whose wait at the banks was avoidably lengthened.

The authorities were apparently watching the proceedings with a keen eye. When it was realized that the same set of men were exchanging cash at different times in the same bank or at different banks they introduced the marking of the fingers of the representatives with indelible ink that is generally used during elections. As even then some misuse of the facility was noticed the authorities reduced the amount dispensed for exchange to only Rs. 2000/-. Ingenious as all crooks are, even this they tried to circumvent. Then the practice of exchanging only in the branch where the depositor had his account was introduced to further bar the hoarders from attempts to launder their money.

 It has been a very difficult and strenuous time for people all over the country. As somebody remarked, the entire country was seemingly waiting in long, serpentine queues to exchange their defunct cash in order to run their households, businesses or whatever. Here too the hoarders who are nothing but anti-socials increased the pain of the general public by sending their hired hands. Some deaths occurred of people while waiting in queues.

Likewise, it has been a tough time for the bankers. A few deaths took place in banks too due to over-strain. Nonetheless, they did a tremendous job. Not only did they have to contend with long line of money exchangers, they had to deal with enormous amounts of cash which in many cases were mixed with fake Indian currency. The fake ones, especially those printed in Pakistan, are difficult to detect. Pakistan had made special efforts to set up a press that was capable of introducing almost the same security features as are used in this country. The Bank staff had, therefore, to be careful, keeping a sharp eye while receiving cash that was tendered over the counter. It was kind of a game of matching of wits virtually at every step and checkmating the fraudsters and frustrating their pernicious efforts to 

cheat the government.

Not only did they try to recover whatever was possible from their piles of cash that had become trash, they even tried to save themselves from the arms of the law. They not only burned them, they also dumped in rivers and drains huge numbers of currency notes of high denominations that they were left holding in their offices, business sites or residences. A whole truck-load of currency was reported to have been set fire to. The rot has seeped in so deep that a large number of seizures were made in small towns from Gujarat to Bihar and from Punjab to Tamil Nadu. Many seizures were effected while the cash was being transported by these crooks to places that they thought were convenient for their illicit purposes. On the plus side, the local bodies and the utilities have had a windfall. All outstanding payments have been paid off, including some in advance, to fatten their always-starving finances. Likewise temples too have had so much cash showered on them that some of them have had to hire extra hands to count the piles of cash.  

 No reports of our “netas” (political leaders), the repositories of substantial amounts of black money, have, however, surfaced so far except one from Bhopal where it was reported that they were browbeating cooperative banks to provide them with back-dated FDRs. Cooperative banks still operate manually and the records can be easily fudged

But the unscrupulous man in business or industry is, kind of, never-say-die person. He would never give up and come clean and surrender. Hence, only a small proportion of dirty cash is likely to be exposed and brought overground. A lot will remain underground as liquid cash. A far greater proportion has been invested in fixed assets like land, real estate, etc. But Prime Minister Modi is not going to relent; he is going for broke after the cheats and the unscrupulous. Already, raids have been conducted on jewellers – their shops and residences – and he has announced a drive against “benami” property, i.e. property held against the name of a fictitious person where most of the black money has been invested.

If not anything else, the proceedings in this regard show how rich the country is, only the riches have been cornered by a few crooks. It has always been rich but ordinary people could never enjoy its wealth. The Mughal raiders, the Europeans, the British and now the crooked politician, bureaucrats and businessmen have looted it. It is only Modi who has taken this step knowing full-well it might electorally backfire on him.

*Photo from internet

21^st November 2016