A new window to exchange old notes will defeat the objective behind demonetisations
There’s no logic in opening a window afresh to exchange old Rs 500 and Rs 1,000 currency notes that have long ceased to be legal tender following demonetisation.
Supreme Court’s suggestion does not hold water given that any new window opened will become a huge opportunity for fraudsters to work the wheels of power and benefit from such a move. The court must have had the interest of common people and elderly individuals in mind while making the suggestion based on six petitioners experiences. But, if the government opens yet another window to exchange old notes even for a week, the damage would be immense vis-à-vis the benefit accrued to a few individuals. Of course, we still don’t know the real benefits of the disruptive exercise other than providing new vistas to the taxmen to determine income mismatches. Much more data has been collated on dodgers and evaders and this appears to be the only real spin off.
After Reserve Bank of India (RBI) finally wound up exchange of notes on January 31 this year, there were already demands seeking such an extension. Huge cache of old currency unearthed across the country in the last few months during the raids conducted by law enforcement agencies only confirms the apprehensions. The unscrupulous elements are waiting in the wings for an opportunity to get hold of new currency in exchange for the banned notes in order to legalise the now worthless paper.
Opening a new window would only mean playing into the greed of the tax evaders, corrupt individuals and the mafia, thereby, defeating the very objective behind demonetisation. Narendra Modi government will have to resist the temptation of giving into the suggestions made by Supreme Court given the experience it has had in Nepal, Bhutan, Bangladesh, Sri Lanka and Myanmar.
Reports suggested that huge amounts of unaccounted old Indian currency got into the system after the RBI obliged Nepal’s highest authorities and opened a window in the Himalayan Kingdom even long after the January 31 deadline. If these reports are to be believed, illicit cash hoarders crossed the borders to exchange notes. Experience with Bhutan was different. Field inputs indicated that huge cash in Indian high denomination old currency was converted into Bhutanese notes and waited for the right moment for re-conversion into Indian new notes. Several reports from North Bengal also suggested that a window for exchange of old Indian notes would make the entire demonetisation exercise ineffective. Fraudulent individuals with high stakes and linkages to fake currency mafia in countries like Pakistan, Sri Lanka and Myanmar are bound to take advantage of the proposed new window to exchange old Indian notes. They would eventually succeed in getting legalised new currency notes against the highly sophisticated counterfeit old Indian notes.
After passage of the Specified Bank Notes Bill by both houses of Parliament, the government and RBI were under no obligation to exchange old notes. While the judiciary has flexibility to interpret laws, the legislation itself cannot come under scrutiny after it has been approved by Parliament. Fallout of such an exercise would be that the two amnesty schemes to draw out cash would become virtually infructuous.
Instead, the government must chug ahead with its plan to extend the arc of campaign against corruption and black money. In the process, targeting benami properties would yield results in all likelihood.
Also, the government must tackle the political funding through illicit cash as soon as possible. The election commission will have to take the lead in this in order to make the exercise apolitical. Phasing out cash donations to political parties must begin right away by achieving national consensus. Secondly, the government and election commission will have to take a call on political funding through electoral bonds that could even be traded on the debt market. Thirdly, declaration of assets by those contesting elections from block level to Parliament should be made mandatory without any leeway given. Hence, the focus should be to not allow cash contributions as kegs in destruction of political parties and the polity as such.