Chennai: Former Finance Minister P. Chidambaram on Friday said the demonetisaion of high value currencies will not achieve the purpose of eradicating black money, corruption or counterfeit currencies, but will only lead to people’s misery for another six months.
Going by the printing capacity of the RBI, at least six months would be needed for normalisation and people might not be patient for such a long time. “I don’t know what is in store for the country in the New Year”, he said.
Speaking at Sathyamurthy Bhavan on the topic ‘Demonetisation, an irresponsible move paralysing economy’, Chidambaram said black money is not a stock, but a flow, adding that it could not be eradicated by demonetisation. Whether money is black or white depends on who owns it at what time.
“For example, I pay money to a doctor who does not shows it in his account, converting it into black money. But when he dines at a hotel and pays the money, the hotel owner shows it in his account and the money becomes white. So, black money is a flow and not a stock”. Generation of black money depended on demand and when there is a no demand, it would not be generated.
“For example, when a student joins a medical college, the management demands several lakhs of money in cash and not in cheque. The white money owned by the parents is converted into black money when it is paid to the medical college. The demand for black money generates it and such sources of black money should be closed to eradicate money”, he said.
Money in circulation in the real estate sector is paid and taken in cash and such practices should be checked to eradicate black money, Chidambaram said. The government expected only Rs 10 lakh crore of the about Rs 15,400 lakh crore money to return to the banks, but now it looks like the entire money would return to banks, showing that the move had failed, he said.
Coming to the second objective of curbing corruption, he asked “Has demonetisation stopped corruption? How come Sekhar Reddy got so many notes of Rs 2,000 and how did former Chief Secretary Ramamohana Rao obtain so many new notes. The monetisation of Rs 1,000 and Rs 500 had not stopped corruption”, he explained.
When it comes to eradicating fake money, he said only Rs 400 crores of the total Rs 17 lakh crore of money in circulation is counterfeit and it comes to around 0.02. Why should the entire money be declared invalid to eradicate 0.02 per cent of counterfeit notes. “Will anyone burn a house to kill mosquitoes?” he asked.
Now, Prime Minister Narendra Modi is talking of cashless society, he said and pointed out that even developed economies had not gone cashless. For example, the US has 46 per cent of transactions in cash and a well developed economy like Germany uses 80 per cent cash in transaction, while it is 55 per cent in France, he said.
TNCC president S. Thirunavukkarasar presided over the meeting attended by his predecessors K.V. Thangkabalu, M. Krishnasamy and Kumari Anandan....