IT happened once ago, during the Prime Ministership of Indira Gandhi. The government of India has once again launched a currency offensive. Bank notes of Rs 500 and Rs 1000 denominations stop being legal tender by a draconian measure causing untold misery to common people. The intention is laudable as it is to combat counterfeit currency notes and black money in the form of cash. It will however destabilise the country’s rural economy as that is largely cash based. Prime Minister Narendra Modi believes that today’s pain is tomorrow’s gain. As far as the honest citizens are concerned, the government may have apparently resorted to a kind of blitzkrieg. It has to get hold of data and identify possible tax evaders as millions exchange old notes for new. Banks had tried to do it previously but in vain. Besides, a greater portion of black money is not held in cash form. It lies in assets of fictitious entities in the organised sector of our financial system.
This is of course only part of Narendra Modi’s war on black money. He should also use his political clout to bring real estate under the umbrella of GST. That will activise developers to seek tax credits and establish an audit mechanism. States which handle land related transactions can then be persuaded to lower high levels of stamp duty. That will facilitate reporting of such transactions. The government anyway has to do considerably more if the mission of launching a war on black money has to be really disruptive of the menace to the economy
