Pic: Spoorthi Ullal
Daijiworld Media Network - Mangaluru (JS)

Mangaluru, Dec 10: Hitting out at the BJP-led central government, Congress leader and All India Congress Committee (AICC) spokesperson P C Chacko on Saturday December 10 said that demonetisation has been the 'biggest scam' ever witnessed by India since Independence.

Addressing media persons at the district Congress office here on Saturday December 10, Chacko said, "Demonetisation is the biggest scam independent India has ever witnessed. The reason I am calling this a scam is, a huge amount of money was deposited in the banks by the West Bengal unit of BJP. BJP national committee had directed the BJP state unit to acquire land in all districts across the nation. BJP in one stroke acquired 100 acres of land valued at thousand of crores across the country a week or month prior to demonetisation. This was nothing but an exercise to invest BJP's black money into real estate. Twenty registered documents of Bihar, eighty of Odissa and a few other documents of other places were released by the AICC on Novemeber 25 officially in a press conference. The allegations made by us have not been disputed by the BJP.

"A haphazardly planned decision of demonetisation or note change has brought a fast developing nation to its knees, equalizing the country to the economic level of Cuba. At the stroke of midnight on November 8, the confidence of more than a billion Indians was destroyed with the invalidation of high denomination currency notes of Rs 500 and Rs 1,000. The value of the withdrawn currency is Rs 14.08 lac crore, which is 86.4% of the total value (Rs 16.4 lac crore) of currency notes in circulation.

"The stringent limits on cash withdrawals, long queues outside banks and non-functioning ATMs indicate not only the government's unpreparedness to handle the situation, but thoughtlessness as to the short and long term consequences of the act, apart from some hidden motives behind the drastic action. The propagandized objective of the government for demonetisation was to stop terror funding, remove counterfeit currency and flush out black money.

"Terrorism in India is not home grown but cross-border. This is sponsored by international funding and its source is outside India and the currency used for the purpose is rather international and not the Indian rupee. Thus demonetisation of the rupee does not really address the problem. Counterfeit currency was not such a big issue to necessitate such a drastic action. According to the study by Indian Statistical Institute in 2015, the value of counterfeit notes in circulation at any given point of time was approximately Rs 400 crore, which is a mere 0.025 percent of the total budget outlay of Rs 19.78 lac crore," Chacko said.

"It does not make sense to invest Rs 12,000 crore in printing new notes just to put out of circulation counterfeit notes worth Rs 400 crore only. According to some estimates, cash money consists of just 6 percent of unaccounted wealth, and the rest is in other forms of investments like real estate, bullions, foreign currencies, foreign accounts, etc. Even by conservative estimates, the black wealth is around 20 percent of the GDP. This means that the annual generation of black wealth is around Rs 30 lac crore. The value of the withdrawn currency is approximately Rs 14 lac crore. As many as Rs 1,658 crore of Rs 500 notes and 668 crore of Rs 1,000 notes have been withdrawn.

"Without structural changes, institutional and tax policy reforms, it is not possible to hit out at the root causes that generate wealth and operate as a parallel economy. Withdrawing higher denomination currency is not going to make any major impact on the black economy since it does not address the genesis of the problem of black money generation. The sudden announcement to demonetise the high denomination notes has unleashed a reign of chaos on unsuspecting citizens. The Prime Minister said that within 50 days, things would normalize. However, the existing capacity for printing currency notes indicates otherwise."

Elaborating further, Chacko said, "Rs 1,000 notes are printed by the Bhartiya Reserve Bank Note Mudran Pvt Ltd. It has a capacty to print 133 crore of notes per month in two shifts. Even if three shifts were to work, this company can print only 200 crore notes per month. If this government company was to print new Rs 2,000 notes as against the old Rs 1,000 notes which are 668 crore in number, this entire operation will take 3.5 months.

"Rs 500 notes are printed by the Security Printing and Minting Corporation of India Ltd, which has a capacity to print 100 crore notes per month. If this capacity is doubled overnight, it will still take nearly 8 months or more to print 1,658 crore notes of Rs 500. At the current capacity of currency notes production, even if maximized fully, a shortage will prevail for at least 12 to 15 months. The demand for currency note production will be so high that printing of notes to keep as reserves to cover unforeseen circumstances like natural calamities, inflation, GDP growth will be severely constrained.

"Banks do not have cash and ATMs do not have notes. In a country of 125 crore people, there are only 2 lac ATMs. At the rate the ATMs are being recalibrated to accommodate new currency notes, it would take at least another 90 days to upgrade all the ATMs. The central government has changed the rules and objectives of demonetisation 18 times in the first nine days and the rules are being changed everyday. The general public is totally confused," he said.

Impact on economy

Stressing that demonetisation had adversely affected the country's economy, Chacko said, "The economic and human cost fallout is predicted to be huge by several renowned economists. Post demonetisation, GDP growth projections for the 2017 financial year has slipped to as low as 3.50 percent. Industrial production has slumped as major industries have started laying off employees and reducing the number of work shifts. Job growth has come down and business houses have put their recruitments on hold agricultural sector has been the worst hit and daily wage earners are migrating back to their villages for want of cash and work.

"The informal sector accounts for 40 percent of India's GDP which incidentally provides for almost 80 percent of the employment. The informal sector functions primarily on cash transactions. The poorest sections of society like the daily wage laborers, street vendors, farm laborers are the hardest hit. Unless all of them are enfolded into the formal banking system, digital or cashless economy is practically useless at this point in time.

"The revenue secretary stated that the government anticipated the entire money in circulation in the form of demonetised Rs 500 and Rs 1,000 to come back to the banking system to trace transactions and tax black money. This effectively undermines the prospect of any windfall gains to the government arising out of part of the demonetised currency remaining outside the banking system. Out of the demonetised currency notes of a total value of Rs 14.17 lac crore at the end of March 2016, an estimated Rs 11.55 lac crore has been deposited in banks so far. The printing cost of new notes is Rs 12,000 crore. So technically to eliminate Rs 400 crore worth of black money in the form of cash, the government has spent Rs 12,000 crore, besides all other losses. The Centre for Monitoring the Indian Economy (CMIE), an economic forecasting agency has pegged the cost of demonetisation for 50 days at Rs 1.28 lakh crore which includes loss of business or sales, cost to households, expenses from currency notes to the government and the RBI and banks.

"Hence, the Congress party along with all the other opposition parties demands an investigation by joint parlimentary committee into the issue of demonetisation," Chacko said.

MLA J R Lobo, MLC Ivan D'Souza, corporator Shashidar Hegde, interim president of DCC Ibrahim Kodijal and others were present.