Saturday, June 19, 2021
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Is India prepared for a cashless economy?

[dropcap]W[/dropcap]ith demonetisation of Rs. 500 and Rs. 1,000 notes, bullion dealers expect gold jewellery demand to go up for a few days and cash business of jewellers may increase. Jewellers could show backdated cash sales. Those who have cash in hand on their books could also buy such notes with a cut margin and deposit it in banks later on. This move has potentially created a surge in demand for gold jewellery for the next few days. This attempt at curbing black money may not really be able to stop the creation of another such parallel economy with the new notes.  Religious places, NGOs and gold jewellers have become money laundering centres. At many places, even the retail shops have become money exchange centres, they are giving Rs. 400 in exchange of Rs. 500 notes. NGO’s collection boxes and religious places always receive anonymous funds, tracking the source of these donations is just impossible, such centres are accepting huge money while promising them to return the same by keeping their cut. Bank managers are getting offer of 20 per cent cut. Frankly speaking, demonetisation has given new direction to the business of black money.  Money laundering is the process of transforming the proceeds of crime and corruption into ostensibly legitimate assets.

However, by this demonetisation process, common men are the immediate sufferer who lives on daily earn and eat routine. How will they exchange notes? How does one pay daily or weekly wages to labourers in the coming days when the process is slow and amount to be withdrawn from ATM is meagre and small? There should have been prior information so that genuine exchanges and withdrawal could take place with a ceiling amount and time bound.

In the recent past, many religious places came under scanner for their massive collection of wealth let it be churches, mosques or temples. All religious places in India are rich and there is no accountability from where and how they are receiving funds. Many Temple Trusts were accused of mismanaging donations. Moreover, most of the members of the trusts are politically influential people. Charitable organisations collect a substantial proportion of funds through donors who prefer not to reveal their identities—the government’s ban is eliminating their sources for finance.

Non Governmental Organisations (NGOs) have been crying out against the government’s diktat on taxing anonymous donations for some time now. The finance ministry had clamped down on anonymous donations to (non-religious) charitable organisations to prevent money laundering. However, a number of NGOs say that because of a few isolated incidents, many charitable entities have been affected. Section 115BBC was introduced for the first time in the Finance Act, 2006, to tax anonymous donations to charitable organisations at the maximum marginal rate of 30%. Subsequently, a degree of relief was granted under the Finance (No 2) Act, 2009, that such anonymous donations aggregating up to five years of the total income of an organisation or a sum of Rs.1,00,000 whichever is higher will not be taxed. However, there are many ways through which people are making black money white.

Several leading charitable organisations mobilise their funds by placing their donations in collection boxes at shopping malls, airports, hotels and other public places where ordinary citizens feel motivated to contribute money for a good charitable cause, be it for senior citizens, the visually-impaired, impoverished street children or cancer patients. No one knows who the donor is and how much amount they have collected through this. It’s up to the NGO what amount they prefer to show for tax purpose. In such circumstances, many business men who are politically influenced find such organisation as a heaven. Besides, most of the NGOs are belonging to influential people in this country.

Schools and colleges also raise money for various charitable causes with students going from door to door or requesting ordinary citizens in the streets to deposit money in collection boxes. Actually, you cannot prove how much money can be collected from such donations. Leading schools and NGOs collect lakhs of rupees annually through such collection boxes as they receive more anonymous donations, while their smaller counterparts may not be able to do so.

Now coming back to Gold purchase, many buyers are splitting their purchases into smaller value bills to avoid declaring their purchases to the Income tax authorities. This panic buying began on Tuesday evening as soon as Prime Minister Narendra Modi announced the demonetisation of Rs. 500 and Rs. 1,000 notes through television. Many jewellers stayed open till midnight as word spread of the demonetisation drive. Most buyers at Zaveri Bazaar on Tuesday and even early Wednesday hailed from the Gujarati and Marwadi communities remained in the shop 24/7. Meanwhile, official prices of gold went up to a three-year high of Rs. 40,000 per ten grams overnight. Using demonetisation to attack black money is definitely a great idea; and the manner in which it has been executed by the government is little suspicious. However, when implementing this grand design, care would have been taken to ensure that all the pieces are together, because if they are not, it would result in chaos. When it is believed that high denomination notes leads to generation of a parallel economy or black money, introducing new ones with higher denomination will be met with suspicion by the public. There can always be a repetition of such an act in future, and no one would like to be left holding such notes. Further, terming Rs. 500 and Rs. 1000 notes as high value can be debated as one can’t buy many commodities using Rs. 500 note from the market—a single can of edible oil for a family of four costs more than this amount. Similarly, Rs.1000 note is not enough to pay milk bill for a month.

The other issue of demonetisation is the timing. There is compelling reason to do it immediately as this does not give time to anyone for disposing these notes. The success of this scheme will hinge heavily on whether our systems are prepared to face this challenge. Our banks need to be geared up to make such provisions and in the past it has been observed that ATMs have tended to run out of money on long holiday weekends. With volumes increasing, the banks across the country need to ensure that all branches across the country are equipped for the same. Even prior to this move, banks were never able to provide Rs. 100 notes to customers in sufficient quantities. Hopefully, this issue has been addressed appropriately otherwise it could lead to substantial unrest. In particular, households are facing the challenge of keeping money for emergencies. Emergency money is normally locked in the denomination of Rs. 500 and Rs. 1000. Hence, the next few months would be hectic as they strive to restore balance.

 (Any suggestions, comments or dispute with regards to this article send us on feedback@afternoonvoice.com)

Dr. Vaidehi Tamanhttp://www.vaidehisachin.com
Dr. Vaidehi is an Investigative Journalist, Editor, Ethical Hacker, Philanthropist, and an Author. She is Editor-in-Chief of Newsmakers Broadcasting and Communications Pvt. Ltd. Since 11 years, which features an English daily tabloid – Afternoon Voice, a Marathi web portal – Mumbai Manoos, monthly magazines like Hackers5, Beyond the news (international) and Maritime Bridges. She is also an EC Council Certified Ethical Hacker, Certified Security Analyst and is also a Licensed Penetration Tester which she caters for her sister-concern Kaizen-India Infosec Solutions Pvt. Ltd.

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