2 years ago, this very day, the Prime Minister, Narendra Modi, in a nation-wide televised address, announced demonetisation. An activity that in his own words, made the Rs 500 and Rs 1,000 notes just another piece of paper.
Modi cited curbing black money and corruption as the major reason to perform such a nationwide exercise. Today we try to answer a couple of questions that have circled around “black money”.
What is Black Money?
Any money on which tax is not paid to the government is black money. Even the money that might be earned through legal means can be black money if it has been transacted in a manner which leads to tax evasion. For eg. on buying a product from a shop, if you don’t get the receipt of the trade, the money could be termed as black money if it was kept out of their accounts books too.
So did weeding out Rs 500 and Rs 1000 help the government counter the forces of black money?
According to leading economists, the premise that cash was the carrier of black money is faulty. They feel that cash is only a fractional part of it. Critics of demonetization have pointed out to the repetitively changing narrative of the government.
Initially announced as a method to counter the black market, the government later announced that it was actually a drive to shift to a cashless economy. The imperative of the government again changed when they commented that the move was to bring idle money into the economy to expand the tax base. Academics view this change of goal posts quite critically.
According to Arun Kumar, who is a professor at Indian Institute of Social Sciences, large deposits by businesses do not automatically become black, and it is for the Income Tax Department to ascertain that the sums deposited have been done so as a result of black income.
A lot of online and offline surveys have gone on to show that it is not the demonetization that a large section of the people has come to despise, but the lack of preparedness with which it was implemented. Scholars and thinkers have argued that black money needs to be tackled, but have criticized demonetization as a means of fighting black money.
Also read: Chidambaram attacks government on demonetisation
A clearer picture of demonetization’s actual impact across all sectors of India’s economic and social sectors remains to be seen.
