It has been more than five months since Prime Minister Narendra Modi took the momentous decision of scrapping ₹500 and ₹1,000 notes, making 86 per cent of the notes in circulation illegal in one stroke. After all these months, what has this unprecedented move achieved? Has it been able to stanch the flow of black money? Has it eradicated counterfeit currency and given digital payments a big push, as promised?
These are some of the questions that veteran journalist and economist C Rammanohar Reddy tries to answer in his book, Demonetisation and Black Money . The book is written in a lucid style, shorn of jargon and aimed at the general reader who needs no prior background in economics to understand the subject. The tone of the book is understated, but by no means uncritical.
Black vs white
The author lays bare, with great clarity, the definition of black money and the black economy, how black money is generated and how it is intricately linked with the ‘white’ economy, and how black money moves effortlessly from the black to the ‘white’ part.
The book serves as an excellent primer for those interested in delving into this complex and often difficult issue.
To me, the most interesting and absorbing chapter of the book is where the author talks about black money and politics. It is almost a truism that political parties have a big role to play, both in the generation and laundering of black money.
Election and black money
To give a recent example, ₹89 crore was alleged to have been earmarked for spending in the now cancelled RK Nagar bypoll in Tamil Nadu.
Election campaigns have become prohibitively expensive affairs, as polls are being fought increasingly by wealthy candidates. Party tickets are handed out to candidates who have the best chance to win, and these usually turn out to be the wealthiest who have deep pockets to fund their campaigns. Once in office, the ‘winners’ then use their term to recoup their investment and more, which comes in handy to fund their re-election.
To quote the author, “Assets of the winners increased by 222 per cent in the intervening period and the non-winners by 134 per cent”.
So the author talks about black money being a ‘source’ and ‘sink’ in electoral politics and crucially, there seems to be a reluctance to address this issue. The political parties’ silence on black money in politics is the reason why the opposition’s strident criticism of demonetisation rang hollow. To quote the author, “Political activity — during elections in particular — feeds off black money, and, just as important, black money feeds off politics”.
Business and politics
The author makes another crucial observation on how, since the economic reforms in the early 1990s, not only have more business leaders taken to politics, but more politicians have developed business interests, often blurring the lines between the two. This has led to the interesting phenomenon of the ‘political entrepreneur’. This trend seems to be more pronounced in some regional parties, though national parties are by no means immune to it.
This interface between business and politics is a field which is ripe for further research, by both academics and the media.
The author ends the chapter by saying, “It would appear that political parties have a stake in the status quo”.
Now this raises another important question — given the stake that political parties have in maintaining the status quo, are we being rather naive in expecting our politicians to lead the charge against black money?
Endless loop
But then, it is the politicians that we elect to office and hand the levers of governance to, and it is the politicians who are Constitutionally empowered to enact laws. So, as a society, we seem to be in a curious bind — on one hand we know that black money is embedded in our political culture and, on the other, we don’t seem have an option but to rely on these very politicians to tackle the black money menace.
Is there a way out of this conundrum? Can any other institution in this country lead the charge against black money and corruption? I’m sure there’s another book waiting to be written on the subject.