Black money hogged the limelight in 2014. The promise of ‘bringing back kala dhan or black money’ dominated the poll promises of the then Narendra Modi-led BJP and played a big role in delivering to the saffron party a landslide victory which decimated the Congress-led Opposition. The then BJP president Rajnath Singh publicly stated that if voted to power at the Centre, the party would bring back all the black money stashed in foreign banks 'within 150 days'.
Come 2019, black money is a rarely used word in Modi’s election rallies; for his bête noire, Congress president Rahul Gandhi, kala dhan is not a priority.
What happened to BJP’s promise? First, what is black money? Any income upon which the tax is not paid to the government as per rules and not disclosed to the government is unaccounted cash. Since it came to power, BJP launched a few initiatives to target black money. The biggest of all was demonetisation: The sudden withdrawal of Rs 500 and Rs 1,000 notes that constituted 86 percent of the currency in the system, hoping that at least Rs 3 to 4 lakh crore of unaccounted cash will not return to the system and the government can ask the RBI to transfer that amount for its use.
This calculation went horribly wrong. Not only over 99 percent of demonetised money came back to bank branches, such inflows put the income tax authorities in a spot since the onus to filter good money from bad in these deposits fell on them. Till, date there is no major progress as far as recovery is concerned. At the same time, this exercise came at a heavy cost to the RBI and the economy The RBI had to spend not less than Rs 20,000 crore for implementation. So far, the government has not commissioned any official study or released its assessments on the impact of demonetisation.
But at least 50 lakh jobs were lost since demonetisation in 2016, found a study commissioned by Centre for Sustainable Employment (CSE) at Azim Premji University. Another study by a group of US economists, in a working paper Cash and the economy: Evidence from India’s demonetisation authored by Gabriel Chodorow-Reich, Gita Gopinath, Prachi Mishra, and Abhinav Narayanan said demonetisation shaved off two percent from India’s GDP in the immediate period following the note ban. To sum up, demonetisaton did very little to recover black money.
A handful of schemes were launched subsequently to induce tax cheats to comply. These included the Income Declaration Scheme, Black Money and Imposition of Tax Act and Pradhan Mantri Garib Kalyan Yojana (PMGKY). The exact figures are not available, but if the information from the government till now offers any clue, PMGKY was largely a failure with just about Rs 5,000 crore disclosed under it and around Rs 65,000 crore under other IDS. The taxmen are after these accounts. If we add the reported figures under other schemes such as Benami Act and findings of income tax searches, the combined figure of black money identified comes to around Rs 1.15 lakh crore.
But the problem is that even if they manage to tax this money at 45-50 percent, these figures form only a miniscule of the total amount of black money speculated to have been stashed abroad and in India mostly converted to other form of assets. Retired IIM (B) professor R Vaidyanathan, who wrote a book entitled Black money and Tax Havens, puts the figure of domestic black money at Rs 15 lakh crore and Rs 65 lakh crore abroad.
So, one reason why black money is missing from BJP’s political rallies this time could be the fact that there isn't really a good figure to talk about as far as black money recovery is concerned when compared with the estimated unaccounted cash in the economy. The second could be electoral bonds.
Latest vehicle for black money?
Electoral bonds were introduced with the goal of bringing in greater transparency to political funding. Under this scheme, donors could walk into a designated bank and buy electoral bonds of a certain value, then deposit into the account of his/her preferred political party. No questions asked. The electoral bonds, thus, proved to be even more non-transparent an instrument than even straight cash donations which were even partly (high-value donations) disclosed to the Election Commission.
If anyone thought that common man used this instrument to donate to the political party of his liking, they're wrong. According to an RTI reply, 99 percent of donations received by political parties between March 2018 and 24 January, 2019, were as electoral bonds of Rs 10 lakh and Rs 1 crore. Guess who was buying these bonds? Not surprisingly, the ruling BJP got 95 percent of the funds through electoral bonds (around Rs 210 crore). The Election Commission woke up to the problem a tad late.
The Supreme Court asking all political parties to furnish details of donations through electoral bonds by 31 May put this problem back into the spotlight.
Now, let’s come to the central point. What is the link between the now forgotten black money issue and the mysterious electoral bonds? To put it simply, one could be the facilitator to the other to thrive: with no questions asked.
This could happen in two ways: One, companies can transfer black money to political parties through such bonds, either by self or through a subsidiary firm set up for this purpose. This can also prove to be a channel to bribe the ruling party if a corporation needs favours from the government.
Second, opaque political funding could also hinder the black money battle through other channels. How will the government take action against a firm found to be involved in black money transaction if the same company has contributed generously to the party through electoral bonds?
The Election Commission has raised the right questions in the Supreme Court, albeit a little late. Handing over the names of donors in a sealed envelope to the court is no solution to the threat posed by this instrument to the idea of clean political funding. Electoral bonds needs to be scrapped outright or the details must be made accessible to the public on the EC website to bring in real transparency in poll funding. Fighting black money will remain a gimmick until political parties come clean.
Your guide to the latest election news, analysis, commentary, live updates and schedule for Lok Sabha Elections 2019 on firstpost.com/elections. Follow us on Twitter and Instagram or like our Facebook page for updates from all 543 constituencies for the upcoming general elections.
Updated Date: Apr 19, 2019 17:43:02 IST