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Daily The Hindu Editorial Explanation &Analysis For 8th November, 2017 By Jatin Verma
Discordant notes: A vear after demonetisation. The Government is celebrating November 8, the anniversary of demonetisation, as Anti-Black Money Day. Cabinet Ministers will disperse to State capitals where they will elaborate on demonetisation's numerous putative successes. In the days after more than 80% of the cash in circulation was removed via demonetisation a year ago, chiefly in the quest to stifle the black economy, the discourse turned so extreme and divisive, the goals were sought to be shifted so fast, that getting a fix on demonetisation became touglh. . So the anniversary is a good occasion to revisit the question: has the note-ban proved to be an effective policy tool to attack the black economy and control corruption? The flow of information recently from the Reserve Bank of India (RBI) makes some analysis possible. A few good clues Both former RBI Governor Raghuram Rajan and Deputy Governor R. Gandhi have, following their departures from the central bank, made a few things clear.
e One. the central bank's recommendation to the government was that demonetisation would prove to be a weak weapon in the war on black money, and that superior policy alternatives were available for achieving the objective Second, the government pressed ahead with demonetisation, overruling this expert advice. e It appears the government was in fact out of its depth on the subject. The results from its counting of the returned notes show that the RBI did have a point. With 99% ofthe demonetised 500 and 1,000 notes back in the banking system, little of the stock of the black money in the country was evidently extinguished. Which means it was successfully converted into other forms, thereby delaying, if not altogether escaping, detection.
Another challenge is that of measurement Although the chief goal of demonetisation was to place a check on black money, the government has no official estimate of the size of the black economy. Unofficial estimates range from a third of the white economy to as much as the country's GDP. Without an official estimate, it is impossible to meaningfully evaluate by how much demonetisation successfully down-sized the black economy, if at all e Some contradictions The agenda itself is fraught with contradictions. For weeks now, the rules requiring purchase of gold and diamonds (for lakh or less) to be linked to PAN (Permanent Account Number) are in suspension. Conversion of black money into gold and diamonds has gone on unencumbered. The window opened when the rules were taken down for a technical reason-they had to be reworded. No one knows how long this window will remain open.
A vear after demonetisation was announced, the questions seem to outnumber the answers: Electorally, voters may judge the policy in terms of intent rather than outcomes. -Economists may quibble over the undue costs owing to the debilitating impact on the momentum of economic growth, even as damage to the vulnerable informal sectors remains unmeasured The government's spokespersons may extol the shrinking cash economy and growing digitisation. But an assessment of demonetisation on Anti-Black Money Day can be complete only if its deliverables on the state of corruption and the corrupt are established. Missing from the jumble of successes, data and analyses to be exhibited today will be conclusive proof of reduced corruption with evidence-backed answers to questions like Are fewer bribes being paid and demanded than a year ago? Is corruption down? Are Indians evading less tax post-demon etisation? It would seem India is all set to celebrate what has probably not- can possibly not actually be measured.
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UPSC Secure unacademy Explore a bearch Courses, Topics & Educators Jatin O credi Jatin Verma Worked at Citi Bank. Books, movies, travelling, share trading Have appeared in UPSC CSE twice. Preparing again Activity20 ouros114.4k Followers4 Fwing Impact Jatin Verma replied on a comment 38m 2,619,012 sir, I am not able to find your editorial analysis lessons for August. do you gonna post along with the lessons of July month like you did for.. read more Subrakshi Setg Jatin Verma 38m Editorials for 1 August could be found under July Editorials course in 1 hour from now. Thanks Jatin Verma Reply