A Central Intelligence Agency official posted here in the late Eighties used to say India's criminals were a step ahead of his government. They immediately replicated every new security feature the United States of America incorporated in its visas. I wonder how long it will be before they also forge the promised 2000- and 500-rupee notes which will then finance terrorists, subvert the economy and be hoarded as black money until the next tectonic purge.
This is not to trash Narendra Modi's intention. But the drama of an operation which regards black money as a secret hoard instead of a way of operating, and assumes that 86 per cent of the money in circulation is tainted, can become a dazzling political end in itself. It must be asked if an exercise bearing all the marks of haste and ill-preparedness that has ground the economy to a halt, plunged the country into frenzied chaos and inflicted suffering on millions of people is the right instrument aimed at the appropriate people to deliver the long-term hope of a less unequal society. The Oxfam report, An Economy for the 1%, conveyed the iniquitous message that 62 individuals now own as much wealth as half of humanity or 320 crore people. The wealth of the richest 62 persons has increased by more than half a trillion dollars to $1.76 trillion since 2010 while the wealth of the poorest half of the global population has fallen by 38 per cent or a trillion dollars.
India doesn't lag behind in inequity. Liberalization aggravated the distortions of socialism so that, thanks to corrupt ministers and bureaucrats on the take, a tiny minority of corporate fat cats batten on the country's resources and call the political tune. India's 100 richest people have more money than two-thirds of the population put together. According to Wealth-X, the global leader in providing intelligence on wealth, the top five business houses accounted for 47.5 per cent ($85.5 billion) of the total $180 billion held by 103 Indian billionaires in 2014. Forbes listed only 65 billionaires in 2013 and 61 the previous year. So, the number of billionaires (and we are talking US dollars, not the despised demonetized rupee) is growing if nothing else in India is.
Two years ago, Wealth-X identified the Big Five as Mukesh Ambani, Lakshmi Mittal, Dilip Shanghvi, Azim Premji and Pallonji Shapoorji Mistry. Give or take a few billion dollars here or there, add Shiv Nadar, Kumar Mangalam Birla, Adi Godrej and Shashi and Ravi Ruia and you have a fuller picture. Whether Dhirubhai Ambani would have called them the "right" or the "wrong" people, the sheer mass of their wealth must necessarily include the bulk of the supposedly black money in circulation. How have these 10 financial stalwarts and pillars of economic prowess responded to demonetization? Have they hailed it as a brilliant measure that will cleanse the system, thwart mischievous Pakistanis, and put an end to Islamic terrorism, Kashmiri separatism, Maoist rebellion and various ethnic insurgencies lingering on in the Northeast? Have they expunged their own treasuries of impugned money? Delhi may be buzzing with rumours but I haven't seen any reports either of their liquidity being affected or any comment by these movers and shakers of Indian life in the public domain.
It's usual during national crises for the leaders of civil society - which must include captains of industry - to express their views. The government has every right to expect them to speak out. Instead of only baying for the blood of the absent Vijay Mallya and Lalit Modi, Opposition politicians should also demand that the richest in the land declare themselves. Instead, we have a deafening silence. It's only because of this absence of transparency that a Bharatiya Janata Party legislator can be charged - possibly quite unfairly - with saying, " Adani, Ambani atram-satram in sab ko pehle hi pata thha. Inko hint de diya gaya. Unhone apna kar liya (Adani, Ambani and others knew it beforehand. They had been given a hint and they made arrangements accordingly)." Such suspicions are inevitable in a situation where taxation is high but erratic while political spending is lavish and utterly opaque. Nicholas Kaldor's advice to Jawaharlal Nehru of a maximum tax rate of 15 per cent with much wider and far more effective collection merits revisiting. So do repeated commitments regarding election funding.
The 2014 Lok Sabha election was the most expensive so far. Although a candidate's permitted spending limit was yanked up from Rs 40 lakh to Rs 70 lakh, the Centre for Media Studies claimed that "unaccounted for" money pumped in by "crorepati" candidates, corporates and contractors further pushed up costs. Demonetization would have appeared more justified if political expenses had been listed with counterfeit money, terrorist funding, Pakistani sabotage and tax evasion as a reason for the sudden swoop. But that is asking for the moon. It remains as true today as when Atal Bihari Vajpayee first said it, that every legislator in this country starts his legislative career with the lie of the false election return he submits.
As a State Bank of India banker said at a recent investor's meet organized by a commercial bank, tax evasion is in our DNA. Black money will never be completely eradicated. But the amount might become manageable if India studies the American, German and Australian systems so that the politician-financier nexus is subject to public scrutiny. As Britain's late Robin Cook put it, "[T]he danger to democracy of secret donations is that they put public government under private obligation." Calcutta's blue and white pavement railings, often inconveniencing pedestrians, and the cheap showiness of fairy bulbs offer a tiny example of governance lubricating private pockets. The same thing happens on a much bigger scale with the Central government and major industrial houses. If this government is to inspire more confidence than its predecessors, it must break the linkage either through substantial state funding of elections or by legitimizing and controlling public donations to political parties. The phenomenon of more and more wealthy legislators, according to their own declared returns, needs explaining.
It's in Modi's own interest to strengthen his credibility by rebutting allegations. Anand Sharma's demand for the names of all those who made investments of over Rs 5 lakh in gold, foreign exchange and bonds in the 20 days before demonetization is especially relevant in light of income tax data showing that only 6 per cent of undisclosed assets is in cash. The emotional and polemical aspects of the statement the Congress released last Monday need not detain us. But three points have a bearing on demonetization. They deserve a response not because Congress is better than other parties - in many respects it's probably worse - but because the government must be above suspicion.
First, the All India Congress Committee's claim that a crore of rupees was deposited in the BJP's account in a Calcutta bank on the very day demonetization was announced. Second, its charge that deposits in scheduled banks soared by Rs 5,88,600 crore between August and September this year. Third, the accusation that the National Democratic Alliance government facilitated the flight of capital by increasing the amount of money an Indian can send overseas annually from $75,000 to $1,25,000 and then to $2,50,000. There are probably perfectly simple explanations for these charges. They need to be set out to dispel suspicions of crony capitalism which is only another name for what Chakravarthi Rajagopalachari dubbed "the Licence/Permit Raj".
In the absence of clarification, nothing and nobody will be trusted, not even Wealth-X's seemingly comforting finding that rich Indians are among the world's most generous. The organization found that India's 7,800 "ultra high net worth individuals" who collectively owned $935 billion in personal assets between 2010 and 2013 donated 10.3 per cent of their overall wealth to charities. One cannot but wonder how many of these charities were tax dodges.