But given the large number of transactions, and the banks efforts to save their reputation, it will be years before these dubious transactions are traced and the culprits brought to book. Police and Income tax department are arguably the most corrupt in our corrupt bureaucracy. Unless the government succeeds in bringing the corrupt in these departments to book, the holders of black money will continue to make merry.
If the aim was to reduce corruption, demonetization is a great success. Most government servants are adept at extracting bribes from contractors and hapless ordinary citizens. However, many of them are not as adept at laundering the money. The corrupt government servants are the class that has been worst affected by the demonetization. They can lose their jobs and pensions if caught with the cash. But how long the trauma of demonetization will last and how soon they will return to their old corrupt ways is yet to be seen. Some corrupt engineers have already been caught with bribes taken in new currency.
If the aim of demonetisation was to get a windfall for the government by all demonetised notes in circulation not being deposited, the move is a failure. Thanks to the unholy nexus between jewellers, black money holders and bankers, most of the money has already been deposited.
If the aim was to reduce terror funding by foreign countries and smuggling, the move has been largely successful. Though some new high denomination notes have reached terrorists in Kashmir and the Naxalites, it has certainly created a cash crunch amongst these classes. However, the effect is unlikely to be crippling.
If the aim was to make it difficult for opposition parties from using their hoards of black money to fight elections, the move will certainly succeed to some extent. But it is also making it difficult for the corrupt in the BJP. Also, some votes among migrant workers, tea garden workers who have been the worst hit by demonetisation and small traders who are simply unwilling to pay tax will certainly be lost. Only time will tell if the move benefits the BJP or the opposition.
If the aim was to increase the number of tax payers, the move is going to be a success. Many small traders and self employed people will be forced to file their income tax returns and be a part of the tax net.
Some Unforeseen effects of Demonetisation
Funding of "go shalas" or shelters for cows, collection at temples and funding of vigilantes like "Go raksha" committees have taken a hit. Conspicuous consumption at marriages and parties, fuelled by black money, has taken a hit.
Foreign Media on Demonetisation
Surprisingly, some foreign media including Forbes have decried demonetisation. It almost seems that they are worried that the Indian move could trigger similar moves around the world to the detriment of unscrupulous investors. The upper house in Pakistan has already passed a resolution for banning Rs 5000 notes and sent shock waves through the corrupt in the country.
The financial institutions of the world thrive on hot money. The UK has provided sanctuary to thousands of Indian economic offenders like Vijay Mallaya. Tax havens hold trillions of dollars of our tax cheats and the corrupt. The financial world decries every effort at reducing corruption and tax avoidance. They are unlikely to appreciate Modiji's efforts to eradicate corruption and black money.
Conclusion
Demonetisation is a bold step taken by Modiji. It has been messed up by poor planning by the Finance Minster and the RBI. It has been totally sabotaged by our corrupt bankers, Income Tax Department and bureaucrats. 90 per cent of prosperous Indians are born corrupt. Not paying tax, stealing electricity and water, encroaching government land, adulterating foodstuff, having criminals as our political leaders is not considered shameful by our society.
Our MPs and MLAs are not ashamed of not clearing their bills or not vacating their government accommodation at the end of their tenures. Policemen extract "hafta" from roadside vendors, rickshaw drivers and transporters. Bank managers extract commission to give loans to farmers.
One round of demonetisation will not end Indian corruption or black money. Mr. Modi has a lot of work to do before Indian society can claim to be reasonably honest. My best wishes are with him.
