by Meera Sanyal
18.Indrani Mazumdar, N. Neetha, Indu Agnihotri, ‘Special article - Migration & Gender in India’, Economic & Political Weekly dated 9 March 2013, http://www.im4change.org/siteadmin/tinymce/uploaded/Migration_and_Gender_in_India_2_1.pdf; Prof. Ravi Srivastava, ‘Impact of Internal Migration in India’, Migrating out of Poverty Research Programme Consortium, Refugee and Migratory Movements Research Unit (RMMRU), http://www.rmmru.org/newsite/wp-content/uploads/2013/08/workingpaper41.pdf
19.Study by Thomas and Jayesh 2016, quoted in Research Unit for Political Economy (RUPE) Publication, no. 70, source: http://rupe-india.org/70/stratified.html
20.The Quarterly Employment Survey prepared by the Ministry of Labour and Employment, Government of India, is an establishment-based survey providing changes in non-farm employment in the organized sector in India, namely establishments having 10 or more persons. It is limited to employment in non-farm industrial economy covering 8 sectors: manufacturing, construction, trade, transport, education, health, accommodation and restaurant, and IT/BPO. As per the Sixth Economic Census (2013-14), 58.5 million establishments were found to be in operation, employing 131.29 million persons. The survey covers approx. five per cent of the workforce.
21.‘Pronab Sen interview: “India’s outlook on the future is now much more uncertain”’, Scroll.in interview dated 20 October 2017, https://scroll.in/article/854213/interview-indias-outlook-on-the-future-is-much-more-uncertain-than-what-it-was
22.Capital formation consists of both tangible goods like plants, tools and machinery and intangible goods like high standards of education, health, scientific knowhow, etc. (Hans W. Singer, ‘The Distribution of Gains between Investing and Borrowing Countries’, The American Economic Review, Vol. 40, No. 2, Papers & Proceedings of the 62nd Annual Meeting of the American Economic Association, pp. 473–85, May 1950, https://www.scribd.com/document/256585974/Hans-SINGER-Distribution-of-Gains-Between-Investing-Borrowing). Capital formation requires that a society or country does not apply the whole of its current productive activity to the needs and desire of the immediate consumption, but directs a part of it to the making of capital goods, such as tools and instruments, machines and transport facilities, plant, and equipment, etc. In other words, it is the diversion of a part of society’s currently available resources to the purpose of increasing the stock of capital goods so as to make possible an expansion of consumable output in the future. In essence, capital formation/accumulation is synonymous with investment. (Simon Kuznets, Capital Formation and Economic Growth, Chapter International differences in Capital Formation and Financing, Princeton University Press, 1955, http://www.nber.org/chapters/c1303.pdf).
23.Economic Survey 2018, Chapter 3: ‘Investment and Saving Slowdowns and Recoveries’.
24.RBI 2018 Annual Report, Table 1, p. 236.
25.RBI 2018 Annual Report, Table 3, p. 239.
26.‘Macroeconomic Impact of Demonetization – a Preliminary Assessment’ dated 10 March 2017 prepared by the Monetary Policy Department, RBI.
27.Premiums collected by Life Insurance Corporation of India (LIC) increased by more than 140 per cent (y-o-y) in November 2016. Premia collected by private sector life insurance companies increased by about 50 per cent. About 85 per cent of the total collections by LIC in November 2016 were under the ‘single premium’ policies, which are paid in lump sum.
28.RBI 2018 Annual Report, p. 47.
29.‘Macroeconomic Impact of Demonetization – a Preliminary Assessment dated 10 March 2017 prepared by the Monetary Policy Department, RBI.
30.CMIE data. Source:`https://www.cmie.com/
31.Economic Survey 2018, Chapter 3: ‘Investment and Saving Slowdowns and Recoveries’.
32.The average capacity utilization of manufacturing firms in 2017 was 70–72 per cent.
6 Demonetization Report Card
1.‘It was not notebandi, but nasbandi: Lalu Prasad Yadav’, The Economic Times dated 28 February 2017, https://economictimes.indiatimes.com/news/politics-and-nation/it-was-not-notebandi-but-nasbandi-lalu-prasad-yadav/articleshow/57399035.cms; ‘After “Nasbandi”, Indira Gandhi Lost In 1977, After “Notebandi”, BJP Will Lose In 2019: Derek O’Brien’, Outlook dated 31 August 2017, https://www.outlookindia.com/website/story/after-nasbandi-indira-gandhi-lost-in-1977-after-notebandi-bjp-will-lose-in-2019-/301028
2.Journalist Mara Hvistendahl was to famously state that this was 15 times the number of people sterilized by the Nazis! ‘India’s dark history of sterilisation’, BBC News dated 14 November 2014, https://www.bbc.com/news/world-asia-india-30040790
3.More importantly, we can also see the effect that these decisions had on their successors – and their unwillingness to take major policy decisions based on the fallout of what had happened earlier. For example, in the four decades since 1976, no political party in India has dared to tackle the issue of population. That population growth is slowing organically, as a result not of policy actions, but of growing women’s empowerment, lower infant mortality, and the growing aspirations of India’s middle class, is one of the delightful unintended consequences of the government not taking policy measures that meddle with individual choices.
4.Gold, jewellery, land and property, shareholdings in companies, offshore bank accounts, art, race horses, yachts, crypto-currencies, etc., are common asset classes in which black wealth is held, especially if they can be held anonymously. In India, we refer to such anonymous holdings of black wealth as benami holdings.
5.In an interview to India Legal on 24 November 2016.
6.RBI Annual Report, FY 2017–18, released on 29 August 2018.
7.‘Left calls demonetisation a “money-laundering exercise” to protect corporations’, Mint dated 31 August 2017, https://www.livemint.com/Politics/msjrEuggZTNBH0QBs7vvzK/Left-calls-demonetisation-a-moneylaundering-exercise-to-p.html; ‘Demonetisation was a money laundering exercise: Chidambaram’, India Today dated 30 August 2018, https://www.indiatoday.in/india/story/demonetisation-was-a-money-laundering-exercise-chidambaram-1327123-2018-08-30; ‘Oppn dubs note ban “biggest scam”, “money laundering exercise”’, The Times of India dated 2 September 2017, https://timesofindia.indiatimes.com/business/india-business/oppn-dubs-note-ban-biggest-scam-money-laundering-exercise/articleshow/60342349.cms
8.Transparency International is a Berlin-based NGO working against corruption. It prepares an annual Corruption Perception Index (CPI), which ranks 180 countries based upon institutional perceptions of public sector corruption on a scale of 0–100. A score of zero indicates a ‘highly corrupt’ nation while 100 indicates a ‘very clean’ one. The CPI has emerged as one of the leading barometers of public sector corruption in the world. Its reports are based both on a compilation of other surveys and indices of corruption and in-depth field surveys and interviews. In 2017, New Zealand and Denmark were placed the highest, with scores of 89 and 88, respectively. On the other hand, Syria, South Sudan and Somalia were ranked lowest with scores of 14, 12 and 9, respectively.
9.‘Demonetisation Alone Will Do Nothing to End Corruption’, The Wire dated 16 December 2016, https://thewire.in/economy/demonetisation-alone-will-do-nothing-to-end-corruption
10.‘Opposition rattled, criticism of demonetisation move baseless: Venkaiah’, Hindustan Times dated 15 November 2016, https://www.hindustantimes.com/india-news/opposition-rattled-criticism-of-demonetisation-move-baseless-venkaiah/story-t6oGOl3pRYNVfhykv2E0lN.html
11.The Economic Times reported on 13 July 2018 that during the probe into the 26 November 2008 attacks on Mumbai, the National Investigation Agency found that David Headley, one of the instigators of the attacks, had been provided with fake Indian currency by Pakistan’s Inter-Services Intelligence. ‘David Headley bares all on terror financing by ISI’, The Economic Times dated 13 July 2018, https://economictimes.indiatimes.com/news/defence/david-headley-bares-all-on-terror-financing-by-isi/articleshow/50941498.cms
12.Lok Sabha, Unstarred Question No.3285 dated 5 August 2016.
13.Press release by Ministry of Fi
nance dated 12 March 2013.
14.The RBI has taken several steps to counter fake currency. Most notably the Currency Verification and Processing Systems (CVPS) installed at RBI’s offices since 2001 – the Ultraviolet detectors at Bank branches, the Note Sorting Machines (NSM) capable of detecting counterfeit banknotes at currency chests since 2005; new security features in all bank notes issued since 2005–6 (silver colour shift machine readable security thread, intaglio printing, see through register, electrotype watermark, printing with Optically Variable colour shifting ink, coloured optical fluorescence fibres and numbers printed in fluorescent ink that show when exposed to ultra violet detectors, latent image of the denominational value, and micro-letterings); withdrawal in 2014 of all bank notes issued prior to 2005; and additional security features in currency notes printed since 2015–16 (ascending size of numerals, angular bleed lines to help visually challenged persons, and enlarged identification marks on the `500 and `1,000 notes). In addition, the RBI’s Department of Currency Management defines the guidelines for the Detection and Impounding of Counterfeit Notes in Master Circular 2015–16. The circular lays down a stringent and detailed procedure to be complied with by banks for detecting, recording and confiscating counterfeit notes with stringent penalties for non-compliance.
15.RBI Annual Report 2016–17.
16.Stated by the Minister of State for Finance in response to a query in the Lok Sabha on 3 February 2017.
17.‘The total expenditure incurred on security printing stood at `79.65 billion (`7,965 crore) for the period (July 2016–June 2017) as against `34.2 billion during 2015–16. The upsurge in expenditure during the year was on account of change in the production plan of printing presses due to the introduction of new design notes in higher denominations as well as the requirement of larger volume of notes for replacement of the demonetized currency.’ 2016–17 and 2017–18 RBI Annual Reports.
18.‘Why Demonetisation Could Fail to Make a Dent on Terror Financing’, The Wire dated 11 November 2016, https://thewire.in/economy/demonetization-fail-make-dent-terror-financing
19.Note that Cashless, Paperless, and Digital are not the same thing. Cashless transactions include a range of paper-based instruments such as cheques, drafts, and credit and debit cards. Digital transactions are a sub-set of cashless transactions and include electronic funds transfers such as NEFT, RTGS, IMPS, UPI, and e-wallet transactions.
20.M-Pesa (M for mobile, pesa for money in Swahili) is a mobile phone-based money transfer system that was launched by Vodaphone in 2007 in Kenya and Tanzania. M-Pesa allowed users to deposit, withdraw and transfer money, and pay for goods and services with a mobile phone. Users are charged a small fee for sending and withdrawing money using the service.
21.The Pradhan Mantri Jan Dhan Yojana (PMJDY) loosely translated as the Prime Minister’s People Money Scheme, was launched by Prime Minister Modi on 28 August 2014. Account holders could open bank accounts with no minimum balance requirements, and were entitled to RuPay debit cards. By 4 April 2018, over 314.2 million bank accounts had been opened and 236.6 million RuPay cards issued under the scheme. See https://www.pmjdy.gov.in/account
22.‘Reliance Jio, Paytm apologise for unauthorised use of PM Modi’s photos in ads’, Hindustan Times dated 10 March 2017, https://www.hindustantimes.com/india-news/reliance-jio-paytm-have-apologised-for-using-pm-modi-s-photos-in-ads-says-govt/story-zqHqRkG4duZ7PF79gt3usL.html
23.‘Paytm seeks to cash in on demonetization with advertising blitz’, Mint dated 18 November 2016, https://www.livemint.com/Consumer/pDQiz7D3QcSq4fFyqT3OEN/Paytm-seeks-to-cash-in-on-demonetization-with-advertising-bl.html?utm_source=scroll&utm_medium=referral&utm_campaign=scroll; ‘How Paytm went big on Indian demonetization’, 29 November 2017, https://www.euromoney.com/article/b15ts6qpxvj51d/how-paytm-went-big-on-indian-demonetization
24.‘300% growth at offline retail stores in 6 days: Paytm’, Business Standard dated 18 November 2016, https://www.business-standard.com/article/economy-policy/300-growth-at-offline-retail-stores-in-6-days-paytm-116111701698_1.html
25.‘When India Killed the 1,000-Rupee Note, This Startup Got Busy’, Bloomberg dated 10 January 2017, https://www.bloomberg.com/news/articles/2017-01-09/when-india-killed-the-1-000-rupee-note-this-startup-got-busy
26.See https://www.youtube.com/watch?v=P04F3Fa5mEc
27.‘Did Demonetization Bring About a Digital Transaction Revolution?’, The Wire dated 1 July 2017, https://thewire.in/business/digital-transactions-demonetisation-detailed-analysis
28.‘Modi Government is Misguided in Its Approach to Making India Cashless’, The Wire dated 18 January 2017, https://thewire.in/economy/modi-government-is-misguided-in-its-approach-to-making-india-cashless
29.The ratio of direct to indirect taxes in India is 35:65 (compared to the average in OECD economies of 67:33 in favour of direct taxes). The incidence of direct taxes, namely taxes on income, property, wealth, and capital gains, are borne directly by individuals. On the other hand, the incidence of indirect taxes namely taxes on goods, services, excise, etc., are borne by everyone who purchases/consumes those goods and services. Indirect taxes are considered more regressive due to the fact that rich and poor bear the same tax.
30.www.incometaxindia.gov.in
31.‘Luxury car sales grow fastest in 5 years in India’, Business Today dated 9 January 2018 – data of car sales of Audi, Mercedes, BMW, Jaguar Land Rover and Volvo. Data is as follows: 2014: 31,912 cars; 2015: 36,207; 2016: 33,318; 2017: 38,959. Total number of luxury cars sold between 2014 and 2017: 1,40,396! See https://www.businesstoday.in/sectors/auto/luxury-car-sales-grow-fastest-5-years--india/story/267578.html
32.Vivek Kaul is the author of the Easy Money Trilogy and editor of Vivek Kaul’s Diary. Data in this section is drawn with thanks from his blogs written in 2017–18; https://teekhapan.wordpress.com/category/vivek-kauls-diary/
33.The Direct Taxes Enquiry Committee 1971 (also referred to as the Wanchoo Committee), stated: ‘The higher rates of direct taxes were mainly responsible for tax evasion because they made tax evasion profitable and attractive…When the marginal rate of taxation is as high as 97.75 per cent (which it was at that time), the net profit of concealment can be as much as 4,300 per cent, namely rather than paying 97.75 per cent tax on 100 rupees earned in the top bracket and retaining only 2.25 rupees out of it, by concealing your income, you make a profit of 97.75/2.25 x 100 = 4344 per cent of the after-tax.’ Kishore C. Samal, ‘Chasing Black Money in India’, Journal of Indian School of Political Economy, Vol. 4, No. 2, April–June 1992.
34.‘91 lakh added to tax net post demonetisation, Finance Minister’, The Times of India dated 17 May 2017, https://timesofindia.indiatimes.com/business/india-business/91-lakh-added-to-tax-net-post-demonetisation-finance-minister-arun-jaitley-says/articleshow/58707224.cms
35.‘33 lakh tax payers added to tax net post demonetisation’, The Financial Express dated 1 August 2017, https://www.financialexpress.com/economy/33-lakh-taxpayers-added-to-tax-net-post-demonetisation/789848/
36.In May 2013, CBDT made the e-filing of income tax returns compulsory. The rule was applicable starting in AY 2013-14 for persons having a total assessable income exceeding `5 lakh.
37.‘Demonetisation has positive impact, says Jaitley’, The Indian Express dated 13 February 2017, http://indianexpress.com/article/india/demonetisation-has-positive-impact-says-jaitley-4521324/
38.In a TV interview with Zee News editor Sudhir Chaudhary on 19 January 2018, responding to a question on employment, the PM said, ‘Government initiatives have empowered small-scale entrepreneurs and informal sectors… If someone opens a pakoda shop in front of your office, does that not count at employment? The person’s daily earning of `200 will never come into any books or accounts. The truth is massive people are being employed.’
39.The Economic Survey 2018 stated after implementation of the GST bill on 1 July 2017, ‘Adjusting the base for double and triple counting, the GST has increased the number of unique indirect tax paye
rs by more than 50 per cent, a substantial 3.4 million.’ And also, ‘The GST has been widely heralded for many things, especially its potential to create one Indian market, expand the tax base, and foster cooperative federalism. Yet, almost unnoticed is its one enormous benefit: it will create a vast repository of information, which will enlarge and surely alter our understanding of India’s economy.’
40.Neelkanth Mishra (Managing Director, Economist and Strategist, Credit Suisse India), ‘The hidden growth’, The Indian Express dated 6 August 2013, https://indianexpress.com/article/opinion/columns/the-hidden-growth/
41.NSSO is part of the statistical wing of the Ministry of Statistics and Programme Implementation. The quinquennial Employment and Unemployment surveys of National Sample Survey (NSS) are the primary sources of data on various indicators of labour force at National and State levels. These are used for planning, policy formulation, decision support and as input for further statistical exercises by various Government agencies.
42.A six-month field study was undertaken in 2017 by Deepanshu Mohan, Assistant Professor of Economics and Executive Director, Centre for New Economic Studies at O.P. Jindal Global University, and Richa Sekhani, former researcher at ICRIER, New Delhi. The study was undertaken in cash-run informal bazaars across Delhi such as Mayur Vihar (east Delhi) and the old markets of Chawri Bazaar, Chandni Chowk, and Meena Bazaar (Old Delhi). ‘While Destroying Delhi’s Informal Markets, Demonetisation Also Lead to Rising Informalisation’, The Wire dated 21 July 2017, https://thewire.in/economy/urban-informal-markets-demonetisation
43.‘Instant Recall: How Modi Government Kept Changing Demonetisation’s Goalposts’, The Wire dated 31 August 2017, https://thewire.in/economy/modi-demonetisation-aims-golas
44.Himanshu is an Associate Professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi.
45.This Data represents the period between 28 October 2016 and 6 January 2017 (i.e., days immediately prior to and after demonetization for which fortnightly banking system data are available). The increase takes into account outflows of NRI deposits during the period.
