‘Demonetisation: A Step Towards Cashless Economy’ (Manakin Press, 2017) was an early humble attempt to capture the mood of nation, which demonstrated citizens’ willingness to undergo ‘short term pains for long run gains’ through the Black Swan event that had no parallel in history. This was in spite of the fact that many professional economists, including international monetary institutions, had strongly laid down this prescription for many a country in recent past but none had dared to bite the bullet. India did, much to the amazement of the national and international audience.
Millions and millions were glued to their TV sets at 8 PM on 08.11.2016 when a brief calm statement was made on TV by Prime Minister Modi. The announcement caught practically everyone by surprise, clothed as it was in leak-proof secrecy.
Claims, mostly absurd, began to be made even before the full implications of this decision set in, but for the government it was a clear victory for sound economics over politics, the vested interests were out to give it a nasty look. Even the ex – Prime Minister, who has been a professional economist himself made a political statement to the effect that demonetisation was an ‘organised plunder’. It is only right that young economists be handed over the reins of economic policy making now, ones that aren’t tainted by ‘crony capitalism ‘ or ‘crony socialism’. The role of political commitment cannot be underestimated.
Our Work on ‘Demonetisation: A Step towards Cashless Economy’
When we sat down to work on ‘Demonetisation’ we could not free ourselves of many a doubts that we were victims. Our first question was: where was the need for the uncalled hurry when one could have thoroughly worked on the finer intellectual points in a relaxed manner? Secondly, if the only objective was to unearth black wealth wouldn’t it have been better attained by strengthening tax administration? We were wrong on both of these counts.
Our doubts were cleared up as we found out more information. It turned out that the framework of the scheme was ready in early stages when this government assumed charge. Since then, scores and scores of discussions and think tank activities were pursued to bring the scheme in sync with ground realities. The scheme was on the drawing board when the stupendous task Trinity of Jan Dhan, Aadhar, and Mobile was fully implemented. It may be mentioned that any programme having such multipronged objectives could not have moved an inch further in absence of this Trinity. Similarly, different other roadblocks were identified and taken care of. If any unanticipated event occurred, the built-in flexibility of the programme took care of it. We also found that ‘tracking black wealth’ was only one objective in a galaxy of many other expected outcomes. The most important and most daring objective was unearthing ‘Underground Economy’.
What is Underground Economy?
Underground Economy functions like a regular economy. Transactions of all hues and colours are undertaken in this economy. The only difference is that these transactions are not reported to the government. These transactions are funded by black wealth and generate black income adding to the flow of black money in the economy. Still, it must be pointed out that all transactions in the underground economy are not illegal. Transactions may be legal, they may even intermingle with transactions in the regular economy but if these are not reported to the tax authorities these come to be a part of the underground economy. One may go to a restaurant, have a luxurious meal and settle the bill in cash. The guest having not revealed his identity has cleared up a part of his wealth, the host enters the transactions in his book of accounts. The amount gets transacted in regular economy and is legal.
The underground economy consists of all those transactions that are not reported to the tax authorities. Millions of hawkers, street vendors, petty shopkeepers, rickshaws drivers, and more form part of this economy. Even highly qualified doctors, chartered accountants, tuition academies, and commission agents all form part of this economy. There is nothing legal or illegal about this. However, a substantially large part of the underground economy thrives on illegal activities like smuggling, trafficking in human beings, corruption, drug peddling, counterfeit currency, etc. These activities generate black income, add to the black wealth, further lubricate it and allow it to flourish.
Looking Behind, Around, And Forward
To strike at the root of this economy has been the cherished aim of the different measures being taken, including Demonetisation but it is a small baby step in this war that the nation has inflicted on the underground economy.
‘Digitisation of the Economy’ forms part of the same armour. We address ourselves to different issues involved in this process. To begin with, we acquaint the readers with answers to questions like: what, why and how of Digitisation. We go on to provide a critical assessment of the ‘Digital India’ programme of the government. It is informative and instructive in its delivery, which is why we believe it can go a long way in de-fogging the glasses with which we view this government and its policies.