The constitution bench of the Supreme Court (SC), hearing a batch of 58 petitions filed against demonetisation post November 2016 was persuaded by the petitioners to change its preliminary view that the challenge to demonetisation has become an academic issue. Beginning today, Wednesday, October 12 the SC began hearing the legal arguments raised by petitioners on merits.

At the conclusion of arguments for the day, the Court asked the Union of India and the Reserve Bank of India to file a comprehensive affidavit in response to the petitioners’ arguments, especially the one that Section 26(2) of the Reserve Bank of India Act does not authorise the Union to completely cancel currency notes of particular denominations. The petitioners have argued that Section 26(2) empowers the Centre to cancel currency notes of a particular series and not the entire currency notes.

Ignificantly, Livelaw reported that the bench also said that it wants to see the documents relating to the RBI Board meetings ahead of the announcement of the demonetisation. The case will be next considered on November 9.

The Constitution Bench comprises of Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna and is considering 58 petitions which challenge the decision taken by the Central Government to demonetise the currency notes of Rupees 500 and 1000 denominations.

On the previous hearing date (September 28), the Court had observed that it will first examine whether the petitions challenging demonetisation have become academic.

While both the newly-appointed, Attorney General for India R Venkataramani and Solicitor General of India Tushar Mehta  asserted through the day that the issue has become academic in view of the passage of 6 years, senior sdvocates P Chidambaram and Shyam Divan contended that the validity of the Central Government’s decision was still open to challenge. The senior lawyers appearing for the petitioners raised the argument that the Government lacked the power to cancel the currency notes through an executive order and stressed that the issues hold relevance for the future as well.

Persuaded by the petitioners’ arguments, the bench observed that the issue may not have become academic. The bench also said that it has the duty to answer the issues referred to it by the Constitution Bench and that it has to answer them “one way or the other for posterity”.

Arguments

Solicitor General of India Tushar Mehta’s argument that Court’s time need not be “wasted” on academic issues was met with a sharp rebuttal from senior advocate, Shyam Divan. Divan, appearing for some petitioners, expressed astonishment at the expression “wastage of time” when issues of constitutional importance have been referred. Divan said that he has produced a compilation of the various orders passed by the Constitution Bench and also smaller benches indicating the issues involved in the case. The SC had also said that

individual cases of hardships could be addressed independently. 

Attorney General for India R Venkataramani expressed the view that the issues are now academic. “When the Act is not challenged, the notifications cannot be challenged, that too without a context. The issues are academic and there are political implications”, the AG said.

“If the issue has academic, there is no point in wasting the court’s time. Should we take this up at this stage after passage of time? We can deal with individual issues”, Justice Nazeer suggested.

P Chidambaram said that the demonetisation carried out in 1978 was through a separate Act of the Parliament unlike the 2016 decision. So, the legal issue whether the Section 24 and 26 of the Reserve Bank of India Act can be invoked to demonetise currency notes is very much alive. If the issue is not settled, the government can repeat the same in future. “Whether the demonetisation of this kind withdrawing 86% of currency notes in circulation requires a separate law by the Parliament”, Chidambaram framed the question.

Seemingly moved by Chidambaram’s arguments, the bench turned to the Attorney General seeking his response.  Venkatramani then questioned whether the SC was functioning in its capacity of advisory jurisdiction, but the Judges (both Bopanna and Gavai) commented that the issue is where such actions can be unilaterally be taken in the future. Justice Nazeer also remarked that several landmark judgments of the Supreme Court came in “advisory” jurisdiction and cited the example of SR Bommai case.

Chidambaram stressed that the issue was not about advisory jurisdiction but about the declaration of law. He referred to Article 142 of the Constitution to say that the Supreme Court has the power to declare what is the correct law. He also highlighted that 86% notes were rendered invalid by the decision. In the previous instances of demonitisation, the currency notes which were withdrawn were not much in circulation, as they were of denomination of Rs 10,000 and Rs 5,000.

Solicitor General intervened at this juncture to say that the Courts have not applied the doctrine of proportionality with respect to the economic decisions taken by the Government.

At this juncture, the judges of the bench had a discussion among themselves for a few while. Later, the bench said that it will allow the petitioners to raise their arguments and will grant time to the Centre to respond.

Divan read out the issues formulated in the reference order for the bench. He highlighted that the Supreme Court had withdrawn to itself the cases from High Courts and barred other courts from entertaining petitions on this subject. He also pointed out that a Constitution Bench in 1996 had decided whether the 1978 demonetisation was legal.

The bench asked whether the 1978 demonetisation was similar to the 2016 decision. Divan replied that the answer can be “yes” and “no”. “Yes” to the extent that similar questions relating to powers of the Government to take the action arise. “No” to the extent that the 2016 decision was different in its magnitude, as the 1978 demonetisation was for extremely high value denominations which were rare in circulation. The senior counsel also pointed out that his client was someone who had missed out the window for exchanging notes since he was abroad during the relevant time for a surgery. “It is our hard-earned money, which was rendered naught. It is not some abstract, academic question”.

“The point is, the wisdom of the government is one aspect of the matter and we know where the lakshman rekha is. But the manner in which it is done and the procedure is something which can be examined. But for that, we need to hear”, Justice Nagarathna stated.

“Any declaration one way or the other is for posterity and I feel it is the duty of the Constitution Bench to answer it one way or other”, Justice Nagarathna added.

The AG said that when “momentous decisions” are taken by the government, several aspects are taken into consideration. Justice Nagarathna replied that those aspects will be certainly considered while answering the issues.

(Based on reporting by LiveLaw)

Demonetisation deconstructed

Months after the sudden and uniliateral decision of the prime minister, RBI data had revealed that demonetization was a failure, 99% of banned cash recovered: Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized, was recovered.

The move cost India and Indians, especially small and informal business a lot. In 2018, the Reserve Bank of India (RBI) in its annual report announced that as many as 99.3 per cent of the old Rs. 500 and Rs. 1,000 notes that were banned overnight in November 2016, were returned. Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized was recovered, proving that the move was a massive failure.

 

The “humungous task of processing and verification of specified bank notes (SBNs) was successfully achieved,” the RBI report said.

 

“The SBNs received were verified, counted and processed in the sophisticated high-speed currency verification and processing system (CVPS) for accuracy and genuineness and then shredded, it added. SBNs refer to the demonetised old 500 and 1,000 rupee. “The total SBNs returned from circulation is Rs 15,310.73 billion,” the RBI said in its report.

 

The cost of demonetisation

Last year, the RBI said that its cost of printing currency notes in 2016-17 had doubled to Rs. 7,965 crore from Rs. 3,421 crore in the previous year due to demonetisation.

 

“This means that just Rs 10,720 crore of Rs 500 and Rs 1,000 notes failed to come back to the RBI, as against expectations that over Rs 3 lakh crore of black money would not return to the banking system. The sudden withdrawal of notes in 2016 had created a liquidity shortage, with long queues outside banks and people undergoing immense hardship across the country. It had also roiled the economy, with demand falling, businesses facing a crisis, and GDP growth declining close to 1.5 per cent. Many small units were hit hard, with many reporting huge losses even after nine months,” reported Indian Express.

 

The Guardian reported that 1.5 million jobs were lost due to the move. “The figures suggest prime minister Narendra Modi’s demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5m jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy — a key rationale for the move,” it said.

 

“Industry sources said that even by conservative estimates, at least 12 lakh workers lost their jobs due to the “twin blows” of demonetisation and GST in key sectors like textiles, auto spares, ceramics and engineering goods. In all, if one adds up available government data and industry estimates, the unemployment figure is a staggering 32 lakh,” said a report.

Barkha Dutt in Washington Post: Writing for Washington Post, Barkha argued that in a country where 90% of the transactions were made in cash, the announcement of invalidation of Rs 1000 and Rs 500 notes was meant to shut down the parallel economy run by tax evaders but due to bad planning people ended up being harassed.

Drawing a parallel with former prime minister Indira Gandhi’s speech in early seventies, Barkha wrote, “The audacity of Modi’s demonetization decision and the centralization of power it represents has drawn many parallels with Indira’s actions in the 1970s. His notes ban has especially drawn comparisons with Gandhi’s move to nationalize India’s banks in 1969.”

“Modi’s blend of disruptive individualism, strongman politics and old-style welfare economics falls back on more government, rather than less, as the primary vehicle of change. The ’70s deja vu has confirmed one thing — “Modinomics” is not quite the right-of-center Thatcherite model that many of his supporters may have expected. Indeed, in India, we are back to the future,” Dutt had added.

Related:

RBI data reveals demonetization was a failure, 99% of banned cash recovered

Money Mayhem – Demonetisation Cartoons

Demonetisation: The grandest of blunders made by anyone in Indian political history?

Modi’s RBI and its myopic monetary measures

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Rahul Ingale, 32, is depressed. Sitting in his shop in Shastri Nagar of Dharavi, Mumbai, Ingale, who deals in the leather market, is facing a huge debt. Carrying forward his family business, he buys leather from Kanpur, Lucknow, Kolkata and Chennai and sells it in Dharavi to a number of processing units. “I am in debt of Rs 75 lakh now. There is no business. Complete shutdown. We can’t even pay the rent of our shop,” he says.

Earlier, Ingale had engaged eight workers in his shop. Today, there is no one. In effect, eight unskilled youths have lost their jobs, leaving Ingale and his 62-years-old father, Shivaji Ingale, to manages the business. “We were unable to pay the salaries of those boys. So, now my father and I work,” he says.

Beef Ban & Leather Goods
The ban on beef has taken a heavy toll on around 300 such shops in Dharavi. The locality was earlier a hub of leather works. But now many shops are either shut or are crawling under debt. “I am in this business for 45 years. I have never seen such a downfall in the market. It’s tyranny on people like us. We are left with nothing,” says an emotional and angry Shivaji.

Dharavi, one of the most high-density localities in the world, is also a hub of small- scale industries. As per the records of Dharavi Businessmen Welfare Association, there are 1,000 small units in the area – be it plastic recycling, leather, garments, aluminium factories and bakeries.

The leaked report of the National Sample Survey Office (NSSO) data has recorded a spike in unemployment in 2017-18. The Union government, led by the Bharatiya Janata Party (BJP), has denied the findings of NSSO data. But the reality on ground is entirely different than what the Narendra Modi claims.

The story of the Ingale family is related to beef ban. The current political dispensation at the Centre and Maharashtra banks on the ‘cultural politics’ of ‘beef’ and ‘meat’ to its vote bank. So, one can assume that the Modi Sarkar will ignore the disaster that has hit this industry. But the story of sweet products is no different.

Demonetisation Hit Bakery Units
Parvez Sheikh (37) owns Mumbai’s famous bakery, Nagina, located in Dharavi. He had other two bakeries Ibrahima (Kutti Vadi, Dharavi) and Rose (Mahim). Before demonetisation, Nagina had 40 labourers working two shifts, Ibrahima and Rose had 20 each. Sheikh’s main business entailed selling products like paav, bread and rusk in bulk. “Notebandi was such a big shock that money from street vendors stopped completely. Gradually, the business went down. I had to shut down my two bakeries and now Nagina has been given on rent to another person,” he says. Asked what happened to the workers, he adds: “I has no choice than to bid them goodbye. Many of them were from Bijnore and Barabanki in Uttar Pradesh and have returned to their native places.”

There were 25 such bakeries in Dharavi. But first demonetisation and later the Goods and Services Tax (GST) made them financially vulnerable. “I haven’t understood till date why Modiji brought GST? I know many small businesses who had to close down due to indirect effects of GST,” says Sheikh.

Plastic Industry Melts
Bakery is comparatively a smaller industry in Dharavi, compared with the much bigger plastic industry. Earlier, the area was also a hub for plastic manufacturing. But now many factories have shifted to the outskirts of Mumbai, especially to Vasai, Nalasopara and Navi Mumbai. Only plastic segregation and washing plus recycling industry is left. But that is also huge, with over 600 smaller units, each employing about four to five workers.
Juber Ahme
d is actually a graduate from Allahabad University. But in Dharavi, he does the job of segregating plastic. “I didn’t get a job in UP after completing graduation in 2013. So, I shifted here in 2015. Since then, I have been engaged in this work, as there is no job for me in Mumbai also” he says.

Ahmed says two years ago, there was demand for plastic in different forms. “Every 10 to 15 days, we used to segregate one or one and half tonnes of plastic. The broker used to pick it periodically. Now this period has widened. We don’t get plastic for two, even three months. Now the ratio of one tonne plastic segregation has slipped from 10 days to three months,” he says.

The rate for plastic varies depending on quality, from Rs 7 per kg to Rs 40 per kg. “Now, these rates have also come down. We sell plastic at even Rs 4 kg to Rs 30 kg. This has had a very serious impact on our salaries, too,” he adds.

There are around 600 small units engaged in plastic segregation and washing plus recycling in Dharavi. Hariram Tanwar (Dilliwala), General Secretary of the All Plastic Recyclers Association (APRA), says the business is down by 60-70%. “This started after notebandi (demonetisation). That time our business was shut down for almost two months. It has never recovered filly since then,” he says.

Guddu Sheikh owns a small plastic washing and recycling unit and has engaged six workers. “I haven’t reduced the number of workers. But it’s true that salaries are getting delayed. I don’t deal in ragpickers. My clients are big electric and electronics companies. They send me plastic from their factories. I crack, wash and recycle and send these to manufacturers. Now my problem is that the big companies are producing less. So, I am getting less plastic. Also manufacturers have lower demand now. We are sandwiched in the plastic business,” he says.

Textile Units Fading Away
The most affected industry, be it in jobs or turnover, is textiles. Big companies in somehow surviving the slowdown in the domestic markets but smaller units in Dharavi are not that strong.

Gafar Mansuri (42) was one of the major suppliers of suits in the Dadar, Parel markets. His factory had around 30 workers on two shifts a day. “We used to supply 450 to 550 suits per months. Now the number has reduced to just 100 or 125,” he says. Mansuri blamed the decline in business on demand slowdown. “Mandi chal rhi hai bhai. Pehle showrooms se hamare pas 400 suits to aate hi the. Ab showrooms vale hi bolte hai ke uthaav nahi hai,” (Earlier, showroom demand was about 400 suits , now they say that there is no demand) he adds.

Mansuri was forced to reduce his workforce from 30 to 10. “What do I do with so many boys? I will have to pay them, no? If my payment gets delayed by 2-3 months, how will I pay them? ” he asks. He has asked his two sons, one is in 10th and other is in 8th grade to help in the work. “Bachche padhai ke baad yaha aake chhote mote kam karenge to majdoor ka paisa bachegaa na,” (If my children help me after school, it will help me save my labour costs), explains Mansuri.

Mohammad Ejaj Khan, born and brought up in Mumbai, decided to try his luck in the garment business two and a half years ago. “I started the business with six machines. But then came demonetisation. It was not possible for me to reduce the machines. And, now I don’t have work for my labourers,” he says.

Khan deals in stitching suits, jackets and pants for children. “Earlier Rs 85 was the per coat rate. This has now gone down to Rs 77. A jacket was Rs 22, now it is Rs 17. Pant rate was Rs 40 per piece, which is down to Rs 35,” he adds. This, he says, has affected hundreds of jobs in Dharavi alone.

While films like ‘Slumdog Millionaire’ or ‘Kala’ have portrayed the immense struggle of people of living in Dharavi before world. Hardship is a synonym for Dharavi. But these hard-working people are crumbling now. That’s the gravity of financial disaster they are facing. The Modi Sarkar may contest the NSSO data on unemployment, but it can’t run away from the disaster it has brought to thousands of small units in Dharavi.

Courtesy: Newsclick.in
 

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बैंकर्स यूनियन ने मांगा RBI गवर्नर से इस्तीफा, मौजूदा आर्थिक संकट और मौतों के लिए उर्जित पटेल को बताया जिम्मेदार

You Have Fooled the People, Narendra Bhai, says ex-Confidante, Letter Goes Viral

Real Reason Why Modi Govt Carried out Surgical Strike on Your Pockets

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While reading the written speech, the Governor said “I have read out two pages and now I would read out after para 95.”

On which the Opposition Trinamool Congress members led by Sudip Roy Burman asked the Governor, “Why should you not read out the total speech? We are not opposing you. This is not the convention.”

The MLAs then rushed to the well of the house and shouted slogans like shame, shame. The ruling Left Front members, however, did not react.

The governor read out the rest of his written speech and left the Assembly House.

The governor did not read out the portion which stated, “Communal situation in the country is tense. Minorities and Dalits are under attack and intolerance is increasing. This is what is causing harm to peace, tranquillity, and sense of integrity which is very important for the advancement of the country.”

“Dismantling the erstwhile Planning Commission has caused financial constraints to special category states, more particularly small, North Eastern states like Tripura with limited internal resources,” the written speech said.

“Due to non-functioning of the consultative mechanism between the centre and states, the trend of one party rule is increasing. Thus, the federal structure in the country is virtually under jeopardy,” it said.

“Farmers are not getting remunerative prices of their produce; as a result suicide among farmers have been increasing for the past three years,” it added.

“Demonetisation has paralysed the financial transactions, as over 85 per cent of currency in circulation has been rendered in one stroke. It has caused immense hardship to the common people,” the speech said.

CPI(M) state secretary Bijan Dhar declined to comment saying that he is not a member of the House.

Roy Burman said, “What astonished me is the silence of the ruling party members. They kept mum because the government led by Manik Sarkar did not want to annoy the Modi government because the Centre is well aware about corruption of this government and its involvement in chit fund scams.

“What was the reason for the decision? The reason is that in the governors speech, the role of the NDA government was sharply criticised, so, he skipped that portion,” the TMC leader said.

Roy has been a hugely controversial governor because of his repeated hate-filled tweets targetting India’s Muslims. His critics have always slammed him for bringing the office of a constitutional post to utter disrepute.

In 2015, he had proudly flaunted his long association with the Hindutva organisation, the RSS, adding that he continued to take part i the latter’s activities even after assuming the office of the governor.

(With PTI inputs)

Courtesy: Janta ka Reporter

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The Indian National Bank Empolyees Federation has, in a letter dated. December 22, 2016 to Finance Minister Arun Jaitley highlighted the fact that Bank employees have been used by the Modi government as the proverbial ‘fall guys’ to deal with public wrath following Notebandi (demonetization).

Meanwhile, PTI reports that the All India Bank Employees Association (AIBEA) and All India Bank Officers Association (AIBOA) have issued a call for a demonstration against the problems that various banks and their employees are facing due to demonetisation. The union will hold demonstrations on 28 December, followed by the addressing of another letter to Union Finance Minister Arun Jaitley on December 29, the two bank unions said. The union members also plan to demonstrate over the issue on  January 2 and 3, 2017.

The letter by the National Bank Employees Federation states that

“…we emphatically like to submit that the Bank employees has been used by the Govt. as a front door bloke to tackle the agitated public who has suffered a lot due to unexpected wave of financial concerns.
 In order to tackle the rush over the counter, the employees, in tune with the Ministers /govt. officials' assurances in respect of deposit of banned currency notes in to the depositors account till December 30,2016 had all along advised the customers to wait for a comparative congenial atmosphere and not to act in haste to deposit banned notes into their accounts.

" Now, when the situation has been eased to some extent and the customers are coming to deposit Rs. 500/1000 Notes in their a/c, they are subjected to questioners' by the same persons tackling the customers over the counter and this is really awesome, as the Bank employees are not like Govt. bureaucrats or politicians to change their stand every now and then to suit their convenience.
 
"On the question of dishonesty on the part of the Bank employees, we, for last 10 years are requesting the Govt. of India to fix accountabilities of the Govt. nominated Chairman/EDs of various public sector Banks as they have no service conditions like other employees and we have enough reasons to believe that they have nexus with the sky high NPA's as well as bad debts write-off in the Banking Industry causing enormous damage to our economy. We have no hesitation to say, that the plight of NPA and bad debt write-off are like high mountains in comparison to small mounds of black money which are supposed to be wiped out through demonetisation. Curiously the GOI is tight lipped on the matter and also are not submitting their affidavit to the judiciary as is required before the Hon'ble High court of Mumbai.

"As the Bank employees are duty bound to carry on the instructions of the higher authorities, they are being used as a human wall against the dissatisfied mob and on December 21,2016 they have been assaulted in many parts of the country. It is unfortunate that due to frequent changes in the policy matters, the employees over the counter are themselves bewildered to follow guidelines envisaged by the RBI/GOI. It will not be out of place to mention that the same thing has happened while receiving currency notes printed before 2005 from the customers.
 
"We, through your good office like to request the GOI/RBI to arrive at a mind-set before issuing an instruction concerning demonetisation and also examine the impact and possible reaction of the Banking public to save the Bank employees from the wrath of the common public.
 
"We, further request you to ask the RBI/Head of the PSBs to make a proper plan to cater the need of the common public for withdrawal of their money from their a/c from 01.01.2017 and do the needful, so that Bank employees do not face the wrath of the public like the episode of first week of December 2016."
 
"AIBEA General Secretary CH Venkatchalam and his AIBOA counterpart S Nagrajan in a statement issued on Tuesday, December 20  said:
As per the call of our organisations, already our units have undertaken the programme of demonstrations in all major centres and met the local executives of RBI to hand over our memorandum.

The unions have demanded that the RBI ensure supply of adequate cash to all banks and branches, restore all ATMs without further delay, and ensure transparency in cash supply to banks. If RBI is not able to supply adequate cash to banks, then decision should be taken to suspend cash transactions in the bank branches till sufficient cash is supplied to banks.

They have also demanded a CBI inquiry into the seizures of huge numbers of new currency notes with some big persons when the bank branches are cash-starved.The unions further demanded compensation to the families of the people and bank staff who lost their lives recently due to demonetisation.

The statement asked RBI and state governments to ensure safety and protection of bank employees and officers by maintaining law and order in all branches to prevent harassment of the staff.

They also want proper compensation to employees and officers for their extra work/late sittings done in the last month or more.

Both the unions claim to have over 5.50 lakh members out of the nearly 9 lakh bank employees in the country.

The RBI on last Tuesday (December 20) modified guidelines saying KYC compliant account holders can deposits more than Rs 5,000 in old currency notes without being questioned by bank officials.Earlier this week, the RBI issued a notification directing banks to conduct due diligence of customers who wish to deposit more than Rs 5,000 in old currency till December 30.
"The credit in such cases shall be afforded only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation," RBI had said.

"The instructions issued vide the RBI communication dated December 19 must be withdrawn forthwith as the banker shall not carry out the duties of CBI/ED/IB at the busy counters," AIBOC General Secretary Harvinder Singh said in a representation to RBI Governor. No accountability should be fixed on the bank officers in this respect as they are thrust with a role not expected of them, it added.

"Having demanded this, we strongly feel that withdrawal of the instruction itself will only confirm the Prime Minister's statement to the public on November 8 and improve public confidence in the banking system and reduce the
hardships faced by the officers at counters," it said.

Pointing out that the banking system itself is losing credibility because of frequent changes in RBI/Government policies, Singh said customer dissatisfaction is increasing because of chaos and confusion created in implementation of the scheme."Bank Officers are being subjected to the anger, anguish and wrath of customers or general public due to short supply of currency notes to the banks, particularly to Public Sector banks," it said.
 
 
 
 

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The raid was simultaneously conducted at 12 different locations in Bhopal on Tuesday, December 20, that includes his house in the Bairagarh township and the three hotels he owns in various parts of Bhopal.

Sushil Vaswani, the BJP leader has been raided by the Income Tax department in Bhopal for allegedly exchanging large amounts of old currency notes with new ones through the Mahanagar Nagrik Cooperative bank.

The raid was simultaneously conducted at 12 different locations in Bhopal on Tuesday that includes his house in the Bairagarh township and the three hotels he owns in various parts of Bhopal.

Earlier in November, BJP’s youth wing secretary from Salem, JVR Arun, was arrested by Tamil Nadu police with bundles of new currency notes worth Rs 20.55 lakh. BJP said that they had removed Arun from organisational responsibilities after his arrest. In another incident, former BJP leader Manish Sharma from West Bengal was also caught with Rs 33 Lakh in Rs 2,000 notes.

Photo Courtesy: Indian Express

Who is Sushil Waswani?

Says India Today,

1. He was once a bus conductor in the now defunct Madhya Pradesh Road Transport Corporation. But that was much before Vaswani made it big in MP BJP politics.
2. He now owns three hotels and several other posh properties in Bhopal.
3. The raid was simultaneously conducted at 12 different locations in Bhopal on Tuesday that includes his house in the Bairagarh township and the three hotels he owns in various parts of Bhopal.
4. Vaswani is also the founder director of the Mahanagar Nagrik Cooperative Bank that was inaugurated by a top BJP leader in 1992.
5. Apart from a senior BJP minister Uma Shankar Gupta, senior RSS leader Shashi Bhai Seth are also among the directors of this bank through which the disproportionate exchange of old and new currency notes has allegedly happened.
6. Vaswani also enjoyed a minister of state status in the BJP government when he was appointed the chairman of the MP Housing Corporation. He proudly displays his past status on the name plate of his house that was raided on Tuesday.
7. The December 20 income tax raid started at around 6.30 am with 64 officers simultaneously searching 12 locations in different parts of the city.
8. According to a top source in the IT department a lot of incriminating evidence pointing towards large scale exchange of currency notes post demonetisation have been recovered during the raids.

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The post गोवा में मांगे गए ’50 दिन’ के अल्टीमेटम पर गुजरात में पलटी मार गए प्रधानमंत्री appeared first on SabrangIndia.

In 1985 and 2010 the Indian Government and the World Bank respectively conducted two different studies on how big the black or “Shadow Economy” of India is[i].[ii] They both came to the same conclusion- it is around 20% of the total GDP.

It is quite a surprising consistency over a quarter of a century. So, let us assume that this share of “black economy” in India is still around 20% of its nominal GDP.

Image: Pradeep Gaur/Mint

According to both the IMF and World Bank India now is the 7th largest economy in the world. According to the IMF the size of India’s economy is 2.25 trillion dollars.[iii] 20% of 2.25 trillion is 450 billion dollars.

Before the last week’s demonetization the total value of liquid currency in India was around Rs. 16250000000000 or around 240 billion dollars. Rs. 500 and Rs.1000notes which have been dropped as legal tender constituted 86% of this total amount which brings its value up to around Rs. 14000000000000 or around 207 billion dollars[iv].

Figure 1: Values are in Billion dollars (US) and from before 9th November 2016

So, we see that the total value of the “black economy” is more than twice the total value of all the 500 and 1000 rupees notes. Now, let us consider that 20% of the 500 and 1000 rupees notes were “black money”. Even then, it will constitute only around 9% of what is generally considered to be the size of India’s “black or shadow economy”.

Hence in conclusion, demonetization will not affect more than 91% of the “Black economy”.

I like many other people have been quite critical of NDA2’s economic policies but we should not assume that the economic policies of our country is determined by “idiots”. Afterall, the Indian economy which was the 11th largest economy in the world last year is the 7th largest this year. So, they must have known that demonetization would affect only a minute section of the “black economy” so why go ahead with it?

Part 2: Why then did the Government do it?
(I am no government insider so this is at best an educated guess and at worst a speculation)

When I look around myself post- demonetization – I see nothing but economic stress. Businesses are not selling anything, because the customers do not have enough legal tender to buy goods and services and I see lots and lots of people everywhere wasting hundreds of individual working hours by engaging in bureaucratic banking activities.

So, I had to ask this question- why did the government impose such economic pain on the people and what was their cost benefit calculation? The conclusion I came to was simple- the government took this step to protect the fragile Indian banking sector against future volatilities caused by reasons like the US Presidential Elections amongst others.

But then why did the government just not tell people the truth? That is the question is it not? Let me answer that by showing first how weak the Indian banking sector was below

Figure 2: Source IMF[v].

The “tier 1” capital is the capital set aside by banks under the Basel Agreements so that the banks can carry on with their business even after facing a financial calamity thus providing assurance of stability to customers. But as is clear from the above diagram this assurance is lowest in India amongst other leading Asian economies.

Also according to the Fitch ratings agency- Indian banks lack tier 3 capital as well. This capital is supposed to protect against tertiary risks like market risks and commodity prices risks[vi].

Figure 3: Source IMF[vii]

This figure shows that only Japanese Banks have lower returns on investments than Indian banks. Consider this- Japan has been going through not years but decades of recession and India is the fastest growing big economy in the world.

Now, let us see what international and national ratings agencies think about Indian banks-

The CRISIL ratings agency in March of 2016 downgraded the following banks- Bank of India, Central Bank of India, Corporation Bank, Dena Bank, IDBI Bank, Indian Overseas Bank, Syndicate Bank and UCO Bank[viii].

Standard & Poor’s ratings downgraded Syndicate Bank, Bank of India and Indian Overseas Bank in May 2016[ix].

ICRA ratings agency lowered the outlook for Bank of India, Indian Overseas Bank, Central Bank of India and UCO Bank[x].

What does the Reserve Bank of India think about this?

According to the Reserve Bank of India, 14.5% of the total loans given out by Indian banks have become NPAs or stressed assets. This amounts to 7% of India’s total GDP or around146 billion dollars[xi].
How does the Government of India look at this problem?

By all parameters the Government of India (GoI) also realises that the situation is quite grim. In 2015 the GoI began the “Indradhanush” plan to re-capitalize the banks by injecting 70,000 crore rupees by 2019[xii]. But this was not enough as the downgrades we saw above all happened after this plan had been launched.

Now consider the above in the light of the results of the US Presidential Election where the Indian Government was staring at a possible Donald Trump victory- a person who made cancelling both intercontinental and regional free trade agreements with some of the closest allies of the US his central theme in the election campaign. Trump’s most significant foreign policy goal was to go back to the isolationism of 1920s and 30s something which aggravated the Great Depression. Whether these things happens or not, we will have to wait till the beginning of next year but, if that happens or even if there is an indication of that happening it would lead to tremendous pressure on the international markets including in India and since India lacks severely in tier 1 and tier 3 capital, its banks will not be able to sustain this pressure. So, what will happen after that? Let me answer this question along with the question I asked above- “But then why did the government just not tell people the truth?” (about demonetization). It was probably because both the situations will have led to the following consequences.

People will rush to the banks not to deposit or exchange cash but to withdraw cash. Government will impose capital limitation over withdrawals (like it has done now- but with the crucial difference being that now it is due to increased demand and then it will be due to lack of supply of money). The people seeing that money is running out and they are not being allowed to withdraw a lot will start buying stuff in bulk and stocking them in their homes- leading to sky rocketing inflation. The RBI then in order to stop people from withdrawing money and to reduce inflation will increase the interest rates substantially. But this increase in interest rates will mean that businesses will not be able to borrow money to expand capacity or even carry on with day to day operations so many businesses will have to shut down leading to massive unemployment and social and political unrest.

I am not pulling the above hypothetical scenario out of my hat- not only because I am not wearing one but also because we saw this exact same situation play out in Greece and Russia in the last few years after their financial institutions collapsed due to the Eurozone crisis and due to the Western sanctions respectively.

So, it seems to me that the NDA2 government instead of dealing with this above mentioned hypothetical situation decided to deal with the consequences of demonetization. How this works out- time will tell but let us look at one of the immediate impacts of the “currency ban”.

Remember the 70000 crore rupees the Indian government was planning to spend on recapitalizing our banks? Well, within just one day after demonetization was announced the State Bank of India alone received deposits worth 53000 crore rupees[xiii]. Also when I see the massive crowd in the banks lining up to deposit their now- worthless currencies I realise that probably the 70000 crore rupees target has already been crossed and by the end of this year the Indian PSU banks should have sufficient resources to deal with their stressed assets comfortably. So, the mission to recapitalize the banks is now a success. But was it worth the pain that we see the government inflicted on the common people with demonetization?

In conclusion I would like to just state something that the Lacanian philosopher Slavoj Zizek said in his review of the 2008 movie- The Dark Knight. So, (Spoiler Alert) Zizek said that the ending where the information about Harvey Dent turning into a villain is suppressed while Batman is falsely vilified in the stead so that people of Gotham have hope in a “brighter future” is a very neo-conservative way of thinking. The absurdity of this thinking is that the powers whom the people elected after judging them to be suitable for holding a post think that the people are too stupid to know the truth and hence it is suppressed from us.

[i] Study was conducted by National Institute of Public Finance and Policy (NIPFP), under the guidance of Dr S. Acharya (1985)
[ii] http://www.economist.com/news/finance-and-economics/21573979-banking-scandal-highlights-problem-black-money-india-evasive-action
[iii] https://knoema.com/nwnfkne/world-gdp-ranking-2016-data-and-charts-forecast
[iv] http://www.hindustantimes.com/india-news/why-govt-s-demonetisation-move-may-wipe-out-illegal-money-worth-rs-140000-00-00-000/story-adn8v35a3Kd6NtBHqXpOjP.html
[v] http://blogs.wsj.com/indiarealtime/2016/05/05/these-three-charts-show-how-bad-things-are-at-indian-banks/
[vi] http://economictimes.indiatimes.com/markets/stocks/news/inadequate-capitalisation-threatens-psu-banks-fitch/articleshow/55334559.cms
[vii] http://blogs.wsj.com/indiarealtime/2016/05/05/these-three-charts-show-how-bad-things-are-at-indian-banks/
[viii] http://www.livemint.com/Industry/8yutjaq7xoY7FnNviw1d2H/Crisil-downgrades-8-public-sector-banks.html
[ix] http://www.livemint.com/Industry/fSaGVUwMkMJt6CTacdiiMO/SP-downgrades-three-PSU-banks-on-asset-quality-troubles.html
[x] http://economictimes.indiatimes.com/industry/banking/finance/banking/psbs-suffer-ratings-and-outlook-downgrade-from-icra/articleshow/51093957.cms
[xi] http://blogs.reuters.com/breakingviews/2016/06/30/breakdown-solving-asias-other-bad-debt-problem/
[xii] http://pib.nic.in/newsite/PrintRelease.aspx?relid=126074
[xiii] http://www.hindustantimes.com/india-news/rs-53-000-crore-received-in-deposits-after-demonetisation-move-sbi/story-VVhqIw0tz6kag77t1F0anK.html

Courtesy: monishborah.wordpress.com

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नोटबंदी के बाद से अब तक कई लोगों की जान जा चुकी है, इस तरह की खबरें रोज सुनाई दे रही है। सारे देश में अराजकता का माहौल पसर गया है।

इन्हीं सब के बीच पूर्व बीजेपी नेता और खनन उद्योगपति जी जनार्दन रेड्डी 16 नवंबर को अपनी बेटी की भव्य शादी को अंजाम देने जा रहे है। गोल्डप्लेटेड शादी कार्ड का निमंतत्रण सभी प्रमुख लोगों को भेजा गया है।

माना जा रहा है कि इस शादी में देश के दिग्गज उद्योगपतियों से लेकर राष्ट्रीय नेताओं और सेलिब्रिटीज के शामिल होने की सम्भावना हैं।

देश में जबरदस्त अराजकता के माहौल के वाबजूद इस शादी पर 500 करोड़ रुपये खर्च किए जाएंगे। मुंबई मिरर की खबर के अनुसार, शादी में आने वाले मेहमानों को गेट से अंदर तक लग्जरी बैलगाड़ियों में बैठाकर ले जाया जाएगा। मेहमानों को अपनी सीट तक ले जाने से उन्हें इन गद्देदार बैलगाड़ियों से पूरे विवाह स्थल की सैर कराई जाएगी।

इतना ही नहीं शादी स्थल बैंगलोर पैलेस को बाॅलीवुड आर्ट डायरेक्टर से तैयार कराया गया है। मेहमानों को वास्तविक अनुभव दिलाने के लिए विवाह गृह को गांव के सेट के रूप में बनाया गया है। जिसमें एक प्रर्दशनी, रथ, मंदिर सबकुछ तैयार कराया गया है। पांच दिनों तक चलने वाली इस शादी में पैसों को पानी की तरह खर्च किया गया है।

देश में इस समय आपातकाल जैसी स्थिति बनी हुई है। गरीब लोग अस्पतालों में इलाज नहीं करा पा रहें, गरीब लोग नमक जैसी 300 रूपये किलों में मिलने की समस्या से पीड़ित है, गरीबों की शादियों में आकाल जैसी की समस्या आ गई है।

छोटे व्यापारियो के लेन-देन बंद हो गए। अजीब सी अराजकता चारों तरफ पसरी दिख रही है ऐसे में 500 करोड़ की शादी की हिमाकत कोई नेता ही दिखा सकता है?

Courtesy: Mumbai Mirror and Janata Ka Reporter

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पूरी खबर के लिए यहाँ क्लिक करें

आभार : अमर उजाला

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