JOIN USCronyism vs fairness
A report card about how the new government fared in bringing back black money and curbing inflation must be in order because the two were its calling cards in coming to power. Currently, as a wedge to Prime Minister Narendra Modi’s resolve of a transparent government, External Affairs Minister Sushma Swaraj is in the eye of a controversy.
Swaraj’s indiscretion in trying to get former IPL commissioner Lalit Modi travel documents from the British government even though his passport had been revoked by the Indian government for his alleged violation of Foreign Exchange Management Act (FEMA) has created a storm. The recipient of her “humanistic” favours was, ironically, a person embroiled in a Rs 425 crore scam against whom a blue corner notice had been issued by the Enforcement Directorate.
Even if one considers this to be rather inconsequential an event simply because this is not the first time that we are getting to see how personal clout plays an important role in subverting the law, the issue has assumed enormous significance for other reasons, the first of which is that Swaraj’s action, by dint of her importance in the party, has dented the BJP government’s claims of corruption or scam free governance.
Alongside this ongoing drama, the former BJP leader, now disgruntled, and noted lawyer Ram Jethmalani came down heavily on Narendra Modi on the black money issue taking the Union Finance Minister Arun Jaitley to task for the putative foot dragging while urging the US to help India in bringing back the black money stacked overseas.
If black money or ill-gotten wealth is an exploitative canker to the Indian economy of which it must be cured, no less corrosive is inflation. Earlier this year, the government had formally adopted inflation targeting, a historic monetary policy overhaul that marks a victory for Reserve Bank of India Governor Raghuram Rajan, as the government makes capping chronically volatile prices a priority.
In a laudable concert, the government and the central bank agreed to set a consumer inflation target of 4 per cent, with a band of plus or minus 2 percentage points, from the financial year ending in March 2017. Flexible Inflation Targeting (FIT) had been devised by first quantifying a range – 2 per cent to 6 per cent – within which inflation as measured by consumer price index will be contained.
Fortunately, the inflation rate recorded at 5.01 per cent in May of 2015 is nowhere near the all time high of 11.16 per cent in November of 2013 that may just give us temporary relief. But consumer price fluctuations can be volatile due to dependence on energy imports, erratic monsoon rains impinging on its large farm sector, difficulties transporting food items to market because of its poor roads and infrastructure and high fiscal deficit.
Besides, in case oil or food prices upswing, or some crisis develops should Greece fail to repay debt to the International Monetary Fund, or there is potential market volatility once US rates rise, the inflation target of 2-6 per cent might well go out of bound.
So, having been able to put a lid on inflation by fortuitous circumstances – stability of food prices, slumping oil prices – it becomes mandatory for the government to put the other can of worms in check. As per the census data, some 215 million Indians – 43 million households with an average of five people living in a household, roughly the population of Canada and Pakistan combined – are those with zero assets, among whom some 80 million people (16 million households), the population of Germany, are Adivasis, which comes to mean that they do not own a television set, a motorcycle, a mobile phone, or any of seven items recognised by the government as being of economic value.
Cashless society
Finance minister Arun Jaitley’s announcement that the government wanted to encourage the use of credit and debit cards and discourage cash transactions towards a cashless society, envisages community or local currencies such as time dollars in the United States, long established business- to- business systems like the WIR Bank in Switzerland, and newer currencies like the regio and the terra.
We now have scientific proof that the monoculture of a single type of currency is a root cause of the repeated monetary and financial instabilities that have manifested throughout modern history. According to the International Monetary Fund, in the four decades between 1970 and 2010, there were no fewer than 145 banking crises, 208 monetary crashes, and 72 sovereign debt crises.
That brings us to the imperative of regaining black money. In 2006, a Global Financial Integrity study estimated that developing countries lost an estimated $858.6 billion (about Rs 43 lakh crore) to $1.06 trillion (about Rs 51 lakh crore) in illicit financial outflows. This report showed that the average amount “stashed away” from India annually during 2002-06 was $27.3 billion which, during the five-year period, amounted to a whopping $136.5 billion.
Even when the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, or black money bill, was passed by both houses of Parliament recently, some members were uncomfortable with its contents. Jaitley assured Lok Sabha that the new legislation really aims to take on ‘big fish’.
The bluff of the earlier ruse that Double Taxation Avoidance Agreement (DTAA) – rightly perceived as a tool for not bringing back black money as it is about declared (white) incomes of entities so that tax may be levied in one or the other country and not in both – and its secrecy clause as an impediment to disclose the names of the offenders – had been called. The symbolic value of l’affaire Lalit Modi could test Narendra Modi’s skill to prize statesmanship over partisanship, dilly-dallying on which can seriously impair the brownie points scored by him.