The Narendra Modi government’s sudden demonetization of `500 and `1,000 notes in November 2016 failed to put a dent in the black economy but caused untold hardship to hundreds of millions of Indians. It has crippled the country’s economy for a long time to come. In this book, Arun Kumar, the country’s leading authority on the black economy, tells us why Modi’s gambit faile The Narendra Modi government’s sudden demonetization of `500 and `1,000 notes in November 2016 failed to put a dent in the black economy but caused untold hardship to hundreds of millions of Indians. It has crippled the country’s economy for a long time to come.
In this book, Arun Kumar, the country’s leading authority on the black economy, tells us why Modi’s gambit failed. He shows us the way in which the problem can be rooted out, provided the government has the political will and determination to act. Today, the black economy is estimated to be 62 per cent of GDP—or about `93 lakh crore ($1.4 trillion). Corrupt businessmen, corrupt politicians, and corrupt members of the executive (bureaucrats, police and the judiciary) are responsible for controlling the black economy and enabling its growth. If the black economy were to be dismantled and turned into a part of the ‘white’ economy, the country’s rate of growth would be 12 per cent. If it had not grown the way it has since the 1970s, India’s per capita income today would be approximately `7 lakh per annum ($11,000) and India would become the second largest economy in the world. If the black economy were taxed at current rates, it would generate `37 lakh crore in additional taxes and the union budget would show a surplus of `31 lakh crore instead of a deficit.
The failure of successive governments to tackle the problem effectively has been the single biggest obstacle to eradicating poverty. It is the cause of both widespread policy failure and the inability of the nation to improve its living conditions rapidly. This felt like a long blog or magazine article - a long Caravan (Indian news magazine) cover story. Have read a few 200 page large-font books lately, but this one is even half of those at 100 pages. Or maybe it will feel like a poor cousin of Gurcharan Das's books (loved his on a similar theme). The author talks of the origins, growth, functioning and remedies of black money and black economy.
He also takes a brief look at PM Modi's demonetisation. Inevitably, bcoz of its len This felt like a long blog or magazine article - a long Caravan (Indian news magazine) cover story.
Have read a few 200 page large-font books lately, but this one is even half of those at 100 pages. Or maybe it will feel like a poor cousin of Gurcharan Das's books (loved his on a similar theme). The author talks of the origins, growth, functioning and remedies of black money and black economy. He also takes a brief look at PM Modi's demonetisation. Inevitably, bcoz of its length such books leave one dissatisfied.
Still, a good introduction to the topic. Thankfully, didnt spend money on it as it was avail in Kindle Unlimited. After demonetization of 2016, when there have been lots of talks on black money, this book is supposed to be timely, busting lots of myth and providing some groundbreaking objective analysis. Sadly the book fails to cover new grounds, that I have not already read in umpteen articles published or understood in newsroom debates. The author admits in the acknowledgements, 'Since I already had a lot of published and unpublished material, I felt that I could quickly write a book.' There are only 4-5 After demonetization of 2016, when there have been lots of talks on black money, this book is supposed to be timely, busting lots of myth and providing some groundbreaking objective analysis. Sadly the book fails to cover new grounds, that I have not already read in umpteen articles published or understood in newsroom debates.
The author admits in the acknowledgements, 'Since I already had a lot of published and unpublished material, I felt that I could quickly write a book.' There are only 4-5 pages on the subject of demonetization, which is a big disappointment. And the book reads exactly like that. Is it unfair to expect more from Prof. Arun Kumar who is country's leading authority on Black Economy?
It's not that the book is a complete drab. I lay below some key highlights: - It is highly difficult to come up with accurate white economy numbers, let alone black economy. However, with whatever calculation methods and data available, Indian's black economy is estimated to be 62% of GDP. Only single digit percentage of black economy is stored in cash. Had there been little or no black economy since independence, every one of us would have been 7 times richer on average. Black Economy can be defined by the wealth not under the reports of the tax authority. This is a no brainer, that black economy is bad for any nation.
The actual rate of growth is higher than that of white economy but lower than the potential rate of growth. The reason is that productivity of investment is lowered by the black economy due to wasteful investment and misuse of capital.
Black money not only impacts the society economically but also in other aspects like health, education and environment. Tax itself is not a bad thing.
High tax countries like Scandinavian countries don't generate huge black economy. Most people evade tax as the believe that their tax money is not properly utilized and they are not the recipient of any direct or indirect benefits from it. In order to tackle the black economy the triad of corrupt politicians, businessmen and the executives has to be dismantled. Some of the potential short term measures to tackle black economy are - bringing political parties, judiciary and the CM/PM offices under the ambit of RTI, take immediate action on available information, establish autonomy of institutions by having head of these organizations independent of their political bosses. Tax reform, judiciary reform, bureaucracy reform and global agreement to end secrecy of banks and tax havens should be the mid-term strategy. Finally, the only way in which black economy can be successfully tackled in long run is if successive governments show the political will to act.
Political reforms and corporate reforms are of essence to bring in this long term plan. This can be brought by people's movement. This book is not for a layman. The author has effectively started the book by counting on the story of the blind men and an elephant.
Ironically, after reading book, we may also feel ourselves as one of blind men who got the tail of elephant and assumed it as a broom. For example, the author has correctly identified the problem of black economy as “a triad of corrupt businessmen, corrupt politicians and corrupt members of the executive” he fails (as I understood) to give a specific way by which This book is not for a layman. The author has effectively started the book by counting on the story of the blind men and an elephant. Ironically, after reading book, we may also feel ourselves as one of blind men who got the tail of elephant and assumed it as a broom. For example, the author has correctly identified the problem of black economy as “a triad of corrupt businessmen, corrupt politicians and corrupt members of the executive” he fails (as I understood) to give a specific way by which this triad can be eliminated. It is better if we see this book only as an opinion book rather than a reference book for an economics student. November 8, 2016 is a date which will be written in bold letters in the Indian Economic history.
Demonitization came as a bolt from the dark to common citizen in India. Even though the intention behind the same is novel, whether the attempt was a success our failure need to be seen. Aun Kumar, through his book Understanding the black economy and black money in India lays bare the real definition and sources of black money and analyses the outcome of demonitization. The initial part of the book gi November 8, 2016 is a date which will be written in bold letters in the Indian Economic history.
Arun Kumar Strides Arcolab
Demonitization came as a bolt from the dark to common citizen in India. Even though the intention behind the same is novel, whether the attempt was a success our failure need to be seen. Aun Kumar, through his book Understanding the black economy and black money in India lays bare the real definition and sources of black money and analyses the outcome of demonitization. The initial part of the book gives an awareness about the whole black money scene. We have been fed upon a wrong notion that major part of the black money lies in the real estate sector. Author states that unlike the General notion, black money cannot be studies in a single dimension.
The book is educational, insightful and well rehearsed. Nevertheless, author takes a prejusdistic and biased stand. In lieu of a systematic pros and cons analysis, author has shunned the idea as outrageous and stupid. Overall the book is academically high graded yet going with antagonistic wave. This review is in return of a free book from the publisher.
“Black cash should not be mistaken by the black economy,” said Prof. Arun Kumar, author of the book “The black economy in India” and the former Head of Centre for Economic Studies and Planning (CESP), Jawaharlal Nehru University (JNU), at a lecture which was organised by the Economics Society of Aligarh Muslim University (AMU) and run by the Economics department of AMU. The lecture was delivered on the topic ‘India after one year of demonetisation’. Citing an example from his book, The Black Economy, Prof. Arun Kumar argued that “without grasping black money, one cannot master white money”.
His book is thus an integration of the black and white economy. He further added that the fall in GDP in the last six quarters consistently which dropped down to 5.7% in the present quarter doesn’t include the unorganised sector. The data being put forward by the govt about a healthy growth rate is but a misnomer and a result of cooked up statistics, the real growth situation is accounted to be in negative terms or almost zero.
He also added various questions of great relevance, like the effectiveness of demonetisation, society wellbeing on the cost of demonetisation, short term and long term costs etc. Kumar put forward an interesting analogy to explain the concept and what demonetisation was doing to the nation. He draws an analogy between the human body and blood circulation and that of the cash and the economy. Just as the blood constitutes an important component in circulating nutrients into the body to help it function properly, similarly the cash in the economy circulates income and furthers economic activity. For explaining this analogy he said that if 86% blood is put out of circulation from the human body, the human body tends to decay. Similarly the economy experienced a leakage of 86% which pulled down the economy dramatically affecting all sections of economic activities.
Juxtaposing this situation with that of Europe he said that the process of demonetisation was a fully fledged move and it took a period of about three years to implement so as to prevent severe disequilibrium in the economy whereas that was not the case with India. Before hitting upon the target, objectives and achievements of the Govt with regards to this sudden move, he implored to distinguish between black income and black wealth.
He stated that to eradicate black money or income there is a need for a long-term process and it’s not an instant activity. Furthering with the objectives of demonetisation of removing counterfeit currency from the circulation as well as to prevent funding of terrorist activity Prof.
Kumar said that the counterfeit currency constitutes a very small part of the money supply and that terrorism is not just funded by counterfeit currency but also by gold etc, thereupon nullifying both the objectives of the draconian move taken by the government. Talking about an important aspect of cost to the economy Prof. Kumar threw light on how badly the demand got hit because of this unprecedented move.
He said that the large section of the economy doesn’t use plastic money with special reference to the unorganised sector which deals in cash money for all transactions, this sector was hit hard and registered a slump in its growth rates. Also, the demand for discretionary goods dropped which further deteriorated the economic activities of the organised sector. As a result, the process of investment saw a rapid decline and profits had hit at massive low levels, all this accumulated and resulted to decline in capacity utilisation.
(In December 2016 Investment declined to a low of nine quarters). Taking into the account the agricultural and banking sector he elucidated that the time when this move took place was a time of transition from Kharif to Rabi crops and the black move resulted in agricultural sector being hit hard at an all-time low where pictures of “empty Mandis” came into the scenario and the agriculturists resorted to protests. The banking sector got paralysed miserably leaving them as transacting houses and not the creators of credit. The RBI also increased the Cash Reserve Ratio (CRR’s) wiping out all the cash out of the hands of the bank. This resulted in the decline in demand for funds which then caused a decline in Investment. The move of demonetisation developed a recessionary condition which took hold for the very long time and this has come to be a net result. In light of the move, he stated that it takes time to print currency and requires paper and ink as well.
The aim of the cashless economy was only a diversion of the goal of having a cashless economy and not the original purpose. He also took a jibe on the facts of the archives that the size of the black economy has been rising since 1955 resulting in policy failures. And within the period of 70 years, 40 committees and commissions have been analysing the problem, he also talks about the ineffectiveness in the education sector and cited the report of ASER( Annual Survey of Education Report) where standard 8th students couldn’t solve basic problems of standard 3rd. He considers black money as a massive factor contributing to inefficiency by taking the example of “seven blind man touching one elephant”. Concluding the lecture prof.
Kumar targeted politics which needs to be corrected. There should be balance between the good economics and good politics. On a lighter note prof. Kumar said that the demonetisation came to be a failure because the leader wanted to portray himself as “ROBIN HOOD”. “It was totally a political decision rather than economic decision” added by prof.
Talking about the solutions to tackling this problem he said that there can be “no one shot solution” to this problem. There is a long-term solution required in the form of consciousness among all. Because in a democracy mistakes are admitted while never in an autocracy.
There should be an awareness regarding the black economy and the action should be taken to root out this problem. He further added by stating the example of Bali Ramayana where not a one-shot victory was achieved but it was a result of the constant efforts which resulted in the triumph of good over evil.
The lecture ended with a question-answer session. Prof Syed Noman Ahmad, Chairperson of the Department of Economics (AMU) welcomed guests and presented a plant to Professor Arun Kumar. In his address Prof. Syed Noman Ahmad pointed out that Dr Kumar has authored ‘The Black Economy in India’ and his another book on “The effects of demonetization” would be released soon this year.’ He further said that Prof. Kumar is researching the topic for last three decades and is an expert on the black economy in India. Professor Ashok Mittal proposed the vote of thanks, while Mr Zulfiqar Seth, PhD Research Scholar conducted the programme. During the programme, Mohd Umair Khan, the student of MA Economics also presented the activities done by the Department’s Economics Society.
Dr Mohammad Asif, Incharge of Economics Society (AMU) also presided the lecture. (This is prepared by Economics Society, AMU). Tamil songs free download starmusiq.
This article attempts to make an advance in the estimation of the size of the black economy in India by bringing in the institutional aspects of black income generation and taking the macroeconomic variables they affect into consideration. The fiscal approach recognises that black incomes are generated through many different ways in various sectors. The size of the black economy is projected on the basis of the share of the services sector and trade in gross domestic product, with the crime rate representing the extent of illegality.
The New Education Policy on the anvil should encourage academic talent and innovation to make the system of higher education more responsive to the needs of various stakeholders instead of just attempting to create a uniform standardised structure. To ensure this, political and bureaucratic interference in educational institutions, which has steadily eroded the quality of higher education in India, will have to be minimised, academic autonomy strengthened and diverse opinions taken into account while building a new policy framework.
The introduction of the goods and services tax may indeed be the biggest reform of taxation so far, but the proposal, as it stands, has led to confusion. Certainly, the myriad taxes producers face will be simplified. But the benefit will go to large-scale producers while the small-scale ones will be at a greater disadvantage than before. The cascading effect will be reduced but not eliminated. With resort to revenue neutrality, prices and costs will not decline.
A 'revenue neutral rate' will, however, be difficult to calculate and will be controversial, given the variety of taxes being replaced. The adoption of a fixed revenue neutral rate for all stages of production and distribution will lead to a rise in the prices of basic and intermediate goods, as also of services, making the introduction of GST inflationary, unless this problem is specifically addressed. This paper highlights the depth of the crisis confronting the global economy. It presents the various ways of understanding demand deficiency, which was the underlying feature of the earlier downturns in capitalist economies.
A resolution of the problems faced then was possible with demand management using Keynesian tools. But the current economic crisis is different from the past ones and the lessons learnt from the past may not be applicable to solving the crisis of 2009. The arguments presented here imply that demand management alone will not work because capitalism faces a basic crisis. One implication is that we need redistribution, but that is not on anyone's agenda today.
When the government announced the demonetization of all Rs 500 and Rs 1,000 notes in November 2016, it said it was doing so for two reasons — it wanted to eliminate counterfeit currency used by terrorists and smugglers, and it wanted to destroy the black economy by forcing the ‘de-hoarding’ of cash held by those generating black income. The objectives of the government were laudable, but it seems as though the scheme was imposed on the country with little or no forethought. First, it must be understood that the black money the government was targeting is only about 1 per cent of the black wealth held in the country and only 3.5 per cent of the black income generated in 2016. Even if the government managed to suck out all the black cash in circulation, it would not have much effect on the black economy which involves various activities in which black incomes are generated. It does not stop these activities from continuing.
Moreover, 80 per cent of the Rs500 and Rs1,000 notes (which constituted 86 per cent of the cash in circulation) was not black money, but rather white money used by businesses and citizens. Not only do a vast majority of Indians, rich and poor, use cash and not credit cards for daily financial transactions but businesses need it for working capital to buy raw materials, pay wages and other requirements for production and sales. Making the situation worse was the inept execution of the demonetization scheme.
If over 85 per cent of a country’s currency is demonetized at one go, replacing it will take months if not years. The capacity to print notes is limited, especially if smaller denomination notes are required. ATMs had to be reconfigured to take in the new notes (as they were of different dimensions than the ones they were replacing) and this apparently was not thought of and took much longer than anticipated. I will not go into the sloppiness of execution as this has been widely discussed in great detail. What I would like to point out is the fallacious thinking behind the scheme, including factors such as the following:. Only a small amount of the black economy would be affected by the demonetization.
Much of the money that was demonetized was not black cash. According to the Pew Research Centre, in 2015, only 22 per cent of adults in India had access to the internet. Shaktimaan all episodes in tamil download torrent. This means the vast majority who do not have access to the internet will be unable to use online banking. Only 17 per cent of Indians have access to smart phones and consequently to mobile phone banking. In a population of 1.3 billion and counting, there are 24.5 million credit cards and 661.8 million debit cards.
A fairly large number of Indians do not have access to credit or debit cards. Most small business do not have card readers so the cashless economy the prime minister and his cheerleaders have been talking of cannot become a reality overnight. A deserted market in November 2016 after demonetization. Markets saw a decrease in average footfall.
(Praveen Kumar/Hindustan Times). It is unlikely that black marketeers and other generators of black money will suffer because the biggest fish were able to quickly convert whatever black cash they had into white.
Some of the avenues used, according to media reports, were the purchase of jewellery, cash donations to temples, conversion of old notes to new notes with the connivance of corrupt bank officials and circulation through the Jan Dhan accounts of the poor. In other words, despite the massive exercise of demonetization, the total amount of black cash that has been demobilized is very small. It was not explained why when high currency notes were being demonetized — as they were the choice of currency for black income generators to hoard — currency of even higher denomination (the Rs2,000 note) was being introduced. Surely, this would be even easier to hoard?. Further, it was thought that the scheme would nullify the counterfeit currency which is thought to be used to finance terrorist activity.
However, what doesn’t seem to have been taken into account is that each counterfeit note can only be used by a terrorist once to finance terrorist activity; counterfeit currency is therefore constantly being generated and the onetime extinguishing of counterfeit currency does not solve the problem. Moreover, if the old notes could be counterfeited it is likely that the same will happen to the new notes. It must also be understood that terrorist activity is not just financed with Indian currency, it can be and is fuelled by dollars, gold, diamonds, drugs and so on. Terrorism is a continuing problem, not a one-off thing. Waiting outside a bank in New Delhi in November, 2016.
(Ravi Choudhary/HT Photo) In sum, the demonetization scheme will not solve the problem of the black economy. However, the economy has been hit.
The livelihoods of the poor and small traders who depend overwhelmingly on cash have been especially hit hard. Deewana tohar mar jai ho mp3 song download. They have had to reduce their expenditures, leading to decline in demand across the economy. The well-off sections facing uncertainty have also cut back discretionary expenditure on things like white goods.
All this has impacted agriculture, services and industry. As the profits of industries decline, they may not be able to pay their loans soon so that the NPAs (nonperforming assets) in banks will rise. As a result of this, the capacity of the banks to lend will decline further.
Arun Kumar Iitd
Businesses facing excess capacity and uncertainty have cut back investment. Thus, since demonetization was announced, unemployment has risen, investment has fallen, banks are facing difficulties and the crisis in agriculture has been aggravated in spite of a good monsoon. All this leads to the emergence of recessionary conditions in the economy. The notion that if a few lakh crores of old notes do not return to the banks, it will somehow become available to the government which it can spend on schemes for the poor is unlikely to be realized since, according to reports, most of the old notes seem to have been returned. Arun Kumar (Courtesy Aleph) It was also believed that when banks become flush with funds they could give these out as loans.
It was argued that interest rates could be lowered so as to boost investment. But as soon as enough cash is available people will withdraw their money. So, this is a temporary deposit and can only be seen as short-term lending. Further, to begin with, the bankers were too busy dealing with cash to focus on lending. Regarding lower interest rates leading to an increase in investment, this is unlikely to take place since when capacity utilization is low, investments do not take place.
In the US, Eurozone, etc., in spite of interest rates being close to zero, investment did not revive for a long time after the 2007 economic meltdown. It has been argued that the budget could stand to benefit through increased tax collection as the black economy declines. However, as argued, the black economy is unlikely to be impacted by demonetization. Even if there is an effect, it will be small. The bigger impact is likely to be the advent of recessionary conditions and a decline in production and incomes which will adversely affect tax collection, leading to an increase in deficit and additional problems for the government. Read more: There could be a benefit over the medium term. The organized sector and some sections of the unorganized sector may move towards using less cash.
The government is pushing hard for it and so are the companies involved in electronic banking and related financial companies. Even though all this will take time, it could help make the economy more efficient in the medium run. The proponents of this move expect that people using electronic transfers of money will leave a trail which will make it more difficult to generate black incomes. If this comes about, the demonetization would have been of some use, but all this lies in the future and there is no guarantee that it will happen. Moreover, this move could have been initiated independently of demonetization and with adequate preparation. In brief, the demonetization scheme has had deleterious short, mid-term and long-term effects.
Arun Kumar Md Houston
Meanwhile, illegal activities, black markets and real estate scams, the production of spurious drugs, capitation fees and various other components of the black economy will carry on after a brief hiatus. First Published: Feb 03, 2017 22:27 IST.