Governance with hindsight or decision-making at the speed of light?

Arun Jaitley

Arun Jaitley  

Ever since Prime Minister Narendra Modi announced the demonetisation of old Rs. 500 and Rs. 1,000 notes on November 8, Ministers and officials have spent much of their waking hours trying to stay one step ahead of black marketeers and tax evaders.

A few senior Cabinet Ministers hung around 7 Lok Kalyan Marg, the Prime Ministerial residence, till nearly midnight on the day Mr. Modi made the momentous declaration, excited about the scale of the decision. But even they did not fully realise the extent to which the government machinery had to prepare for the task ahead.

Soon after Mr. Modi’s return from Japan, a daily review meeting on operational issues started. “After all, just as we hold review meetings, black marketers will also be exchanging notes on just how to subvert systems,” Mr. Modi is reported to have said in a reference to the exercise acquiring an aura of a cops-and-robbers game.

Core group

Senior officials in the Prime Minister’s Office, Finance Minister Arun Jaitley and senior officials from his Ministry form the core of this review set-up. “They meet every day, and feedback is divided into two parts: suggestions and issues. The suggestions are forwarded to Niti Aayog, while the Finance Ministry deal with the issues and forward them to the relevant Ministries,” a senior government official said. This feedback could come from anywhere.

For instance, Odisha Chief Minister Naveen Patnaik’s suggestion that the State be sent notes of only small denominations to pay beneficiaries of various pension schemes was one of the first to be acceded to, with Rs. 140 crore in small-value notes despatched to the State. Many suggestions have been picked up from the survey done on the NaMo app recently. The recent amendment to the Income Tax Act, providing yet another chance to those with undeclared cash to come clean, seems to have come from one such suggestion.

“In my opinion, we have left too much in the hands of the Income-Tax Department. I feel we should have got the VDS [Voluntary Disclosure Scheme] again along with this move, maybe at a little higher rate of 50-55%. In the current scenario, the tax rate will be around 90-95%, so people don’t have any incentive to pay tax. In such a case, either they will try to bribe the Income Tax officer or would not deposit it. So this will increase the corruption, which we are trying to reduce through this move. It would have also reduced the load on the I-T Department significantly and many people with black money in the range of Rs. 5-10 lakh would also have declared that,” Manu Goel suggested in a post on the app.

Naveen Chandola, who also responded on the NaMo app, suggested that bankers could be gaming the system by simply using identity proof by unsuspecting citizens multiple times. Something the government seems to be taking seriously now. “I feel bank employees should be kept under tight surveillance because some of them may also help black money hoarders by simply using a ID proof against multiple currency exchange through the counter. In this way, a person whose ID is used for multiple currency exchange will be unaware he is targeted and the beneficiary will be the black money owner,” he said. “People can distribute their black money among poor people and deposit in their bank account and later withdraw that money," he added in his suggestion, something the Prime Minister seems to have referred to in his speech in Moradabad.

“The government also pulled back the deadline for the use of old notes at petrol pumps from December 15 to December 2, after it was found that though Rs. 100 notes had been released at 150 per cent higher levels than before and disbursed through these outlets, there was hoarding of notes. Once these exemptions go, people will start circulating smaller denomination notes again,” said a senior source in the Finance Ministry.

Many circulars

From November 8 to 30, no fewer than 27 notifications and circulars were issued by the government with regard to demonetisation, a move that raised the allegation of mismanagement and governance by hindsight. Mr. Jaitley, in a recent press statement, termed it a sign of a “responsive government”.

“As remonetisation builds up, you change the conditions that have been imposed, they won’t be static during the entire period,” he had said.

As India enters the second month of demonetisation, and the 50-day period of suffering in ATM queues (mentioned by Mr. Modi) nears its end, the cops-and-robbers game between black money hoarders and the government should, hopefully, come to some sort of a conclusion too.

At the PMO, it’s daily strategising

to stay one step ahead of hoarders and tax evaders

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