Demonetization in India - National Hawker Federation Report

Demonetization in India Has Paralyzed Retail Trade and the Informal Economy, Triggered Violence, Poverty and Despair
National Hawker Federation

By Saktiman Ghosh
Global Research, November 19, 2016

The National Hawker Federation (NHF) expresses its strong disagreement with the ways in which the Government of India has addressed the evil of corruption in the country. While we do feel as a collective of more than 1176 unions and associations of street vendors of this country, that black money and the corruption raj should end and rule of law be established, we strongly believe that struggle against corruption cannot be waged devoid of a strong social will, a long-term agenda, an alternative infrastructural vision, and popular consent.

We have seen in the last few days, how millions have faced unnecessary harassment, and sizeable loss of income due to a sudden and unprecedented demonetization of the economy.

As victims of the structural violence of corruption in bureaucracy, the street vendors are critically aware of how black-markets operate. The people involved in financial corruption hardly keep their undisclosed incomes in the form of hard cash as such. The people of India know how unaccounted money constantly takes the form of precious foreign currencies, real-estate property, and gold. If the Government was serious enough to stop/minimize the circulation of black money, it should have followed different mechanisms, and should not have exposed the entire country to a state of (yet undeclared) economic emergency.

Instead, the Union Government treaded a path that impoverished the 98 percent of India. We know, even after so much self-congratulatory statements about financial inclusionand monetization of welfare through Aadhaar, and the spectacular spread of cell phone and internet infrastructures; Indian trade has continued to remain “post-paid” and hard-cash driven. It is curious to note that even the app based businesses in the urban transport and retail sectors had to take recourse to the prevailing practices of the land.

We believe, a sudden demonetization of the economy was targeted to restructure this age-old system, and paralyze the circulation of hard cash in the market. Such a violent measure has been justified in the name of a holy war against corruption. The ultimate target of the Government is to smoothen the entry of informatized big capital to make an inroad predominantly in retail and transport sectors. The anonymous market process appears to be inadequate to usher in a complete destruction of small economies.

The informal economy of this country, which employs roughly the 93 percent of India’s working class, has been impoverished. Around 50 percent of the street vendors of India do not still have bank accounts. In addition, a sizeable section of street vendors can access banks only at their home towns/villages as they usually keep valid documents at home in safe custody. They migrate to cities, and save their little incomes in the form of INR 500 and 1000 notes. They need the supply of hard cash from the last day’s transaction to start a new cycle in the morning. They procure merchandise from the wholesalers in the late night, or in the early morning depending on the product cycles. It is virtually impossible for these groups to hastily put together a valid documentation and access the banking facility. Even if they access the banks, they do so at a huge cost. Many of them have already spent a full working day in the bank, sacrificing their wages. When they return, they have to re-assemble a broken supply chain.

Who will count the aggregate loss in the informal economy? Why will they bear such economic hardships when they have no role in corruption? Why will they consent to a decision in which their consent is not even sought? What kind of democracy are we practicing in India in which only a handful of top regime functionaries take major economic decisions without debates and public practising in India in which only a handful of top regime functionaries take major economic decisions without debates and publicnotifications? An electoral victory hardly authorizes them to use emergency powers at will. We hope, the Government reconsiders its totalitarian decision, and remains confined to conventional democratic procedures.Saktiman Ghosh General Secretary of the NHF

The original source of this article is Counter Currents
Copyright © Saktiman Ghosh, Counter Currents, 2016

“Black Money” Prominent Citizens Question Delhi Government's Intentions

“Black Money” and India’s Demonetization Project
Prominent Citizens Question Delhi Government's Intentions
By Prof Prabhat Patnaik

Global Research, November 19, 2016    Countercurrents.org 16 November 2016

We, the undersigned, support all efforts to stop corruption, stamp out black money and counterfeit currency, and act against funding that helps creates unrest in the country be it through terrorism or creating divisions and hatred among people.

However, the decision to demonetize Rs 500 and Rs 1000 notes is misconceived and will not address the problem of black money for the following reasons:

1.If it is the Government’s case that high value denomination currency is used to hoard black money, then the decision to reissue new Rs 500 and Rs 1000 notes does not make sense. Issuing even higher value Rs 2000 note is completely inexplicable and puzzling.

2.Black money is generated through evasion of taxes on income from lawful activities and money generated from illegal activities. In the absence of steps to curb the generation of black money, demonetization is a futile exercise, as it proved to be in 1978.

3.In the last 5 years, IT raids have found that only 5-6% of black money is kept in hard cash. Moreover, those who have amassed sizable black money are equipped to find ways
around demonetization by converting their existing cash to bullion, gold jewellery, real estate and foreign currencies through brokers and middle-men. In fact, organized middle-men and touts have already emerged to convert black money into white for a commission.

4.As per The Indian Statistical Institute, Kolkata study done on behalf of the National Investigation Agency (NIA), Rs 400 crores worth of fake currency is in circulation in the Indian economy. This is only .028% of Rs 14,180 billion worth currency demonetised in Rs 500 and Rs 1000 notes

5.Experts including a former RBI Governor and the current Chief Economist of the World Bank have spoken against demonetization.6.86% of currency in circulation is in Rs 500 and Rs 1000 notes. 97% of all transactions by volume are done in cash. Summary demonetization has created chaos all over the country with people unable to purchase daily essentials and, in many cases, life-saving goods and services. 5 persons, including one infant, have died as a direct result of the impact of demonetization

7.Only about 30% of the Indian population has access to the banking system as per data compiled by the banking division of the finance ministry. Moreover, the distribution of banks is highly skewed with a third of all bank branches in only 60 Tier 1 and Tier 2 cities/towns. Consequently, people in rural India who often also suffer from inadequate information have become the worst victims of demonetisation.

8.Reports have started coming in of digital payment systems unable to keep up with the new volume of transactions with credit and debit card servers also going down.

9.All currency has value only because of the inherent trust in the banking system. Summary demonetization has shaken this trust and will likely impact India’s economy well beyond
the initial and widespread chaos.

It is evident that demonetisation will not achieve its stated intent of eliminating black money but has thrown the entire country’s economic system in disarray. Related developments also call into question Government’s intentions and need clarification:

1.Rs 1.14 lakh crore of bad debts has been waived by Government banks in the last 3 years. At the same time, loans worth lakhs of crores of rupees are still outstanding. Why has the
Government not made public the names of the beneficiaries of the waiver and the names of the big defaulters, both individuals and corporations?

2.A key campaign promise was to bring back black money stashed abroad and deposit Rs 15 lakh each from the proceeds in the account of every citizen. Why has the Government not
made public the names held by it of Indian account holders in offshore banks?

3.Were BJP leaders and friends given prior information about the impending demonetisation so that they could take pre-emptive measures to safeguard their assets? [The WB unit of the BJP is reported to have deposited a total of Rs 3 crore in Rs 500 and Rs 1000 notes in its bank accounts in the days and hours before the announcement of the demonetisation. A BJP leader posted pictures of wads of Rs 2000 notes much in advance of the demonetisation. A digital payments company printed a full page advertisement lauding demonetisation in a newspaper on the morning following the announcement at 8 pm on November 8, 2016.]

4.Why did the Government announce that cash deposits higher than Rs 2.5 lakh will be scrutinised against the tax return with 200% penalty for any tax evasion? [This appears to be intended to dissuade people from depositing money so that the Government can claim success of demonetisation and forewarn people to split their deposits among different accounts and different depositors.]
5.All conversions can be done only after filling a form and attaching ID proof. This has led to major harassment of poor and illiterate people and those who do not have an identity card.

6.What is the cost of demonetisation? [It has been estimated that the cost of replacing currency in circulation with new Rs 500 and Rs 2000 notes will be Rs 20,000 crore. Besides, far
greater losses will be incurred by markets predominantly run on cash and the participants (wholesale markets, retail stores, street-vendors, transportation etc) and in lost productivity.]

7.Even if the Government was intent on demonetisation, why was it not implemented after careful planning: new notes printed, arrangements made for distribution, ATMs recalibrated etc? [It has been seen that banks are running out of cash within hours of opening and most ATMs are still non-functional.]

8.We are all concerned about the use of money power in elections. Why hasn’t the Government proposed state funding of elections? Why is the BJP resolutely against transparency in
its own funding by refusing to come under the Right to Information Act?

The summary way demonetisation has been effected is leading to a riot like situation in the country. We demand that the Government ensure that common people have immediate access to enough money to pay for their daily needs and health emergencies. Failing which, we demand the rollback of demonetisation or suspension of demonetisation to enable the common person to make adequate arrangements for daily needs and for more orderly phasing out of the old notes. The role of the Government is to undertake honest tax administration and not to treat the common person like a criminal making him/her stand in line and filling forms to access his/her own legitimate money.

Signed/-
Prabhat Patnaik,Prashant Bhushan, Aruna Roy, Bezwada Wilson, Jayati Ghosh, Harsh Mander,Kavita Srivastav, CP Chandrasekhar, Nikhil Dey, Shantha Sinha, Aniket Alam,Dipa Sinha

The original source of this article is Countercurrents.org  Copyright © Prof Prabhat Patnaik, Countercurrents.org, 2016