05 People most affected by Modi’s Anti-Black Money campaign

01.Politicians

In Indian elections till about a decade ago booth capturing was the biggest problem. With time and efforts of election commission booth capturing was almost eliminated but electoral funding still remains a looming threat to our democratic system. Fighting elections is a costly affair and the expenditure limits set up by election commission are unrealistic and barring a few almost all parties take anonymous donations from affluent business class and which is mostly tax evaded money. Obviously, donations from businessmen are paid back in terms of skewed policies and biased decisions in their favour. Demonetisation along with the budgetary announcements by FM is a crucial step to reduce the amount of anonymous donations to parties from twenty thousand to two thousand rupees to curtail black money into politics.

Dravidian political parties are known to win elections on money power; one of them hardly conducts public meetings and only distributes money as evident in R K Nagar by poll caused by Jayalalithaa’s death. Parties in Maharashtra are famous for giving tickets to real estate businessmen and mint their money. Similarly, UP is also known for regional parties using black money to fund elections by selling tickets. Measures like demonetisation are set to deliver a big jolt to many of them as was evident in UP elections where some parties had less money to spend. Use of tax evaded money for donation to political parties to get undue favours in return is set to reduce in the times to come.

Demonetization will cause a cash crunch for political parties as most of them depended on black money. This would in turn open the debate for much needed electoral reforms that’s been pending for long and ultimately may be a step towards the cleansing of the system. If the politics don’t require black money from corrupt people they may legislate and govern better and not hesitate from taking stern actions against corrupt businessmen, which would formalise the economy to a greater extent leaving the exchequer richer.

02.Hawala Dealers

The shadow economy created due to hawala dealings overburdens the honest, hardworking taxpayers who constitute mere one percent of the total population. Hawala trading is one of the major sources of black money. In hawala, the money is transferred from source to destination without actually moving it. It is a parallel illegal network where the money is given to an agent at the source and is collected from a network agent at the destination in exchange of a commission and government loses tax on such illegal transfers.

In most of the cases this is black money and thus to evade tax authorities this parallel route is used to transfer money. Audits reports and IT raids have proved that a large part of Indian economy is black and that the dishonest politicians, industrialists, bureaucrats have stashed huge amounts of illegal wealth in foreign banks in tax heaven countries.

Hawala trade has also received a punch as a result of demonetization. With demonetization rendering old currency notes invalid, the entire network is broken. Hawala traders are no longer accepting cash and transferring it to a destination because the currency is not a legal tender. Such money if deposited into banks would attract heavy penalties leaving that also as not a very good option.

This random action will result in great losses to such transactions which were outside the tax net and they may not be able to recover from it for long.

03.Real Estate Mafia

In towns, cities and metros, real estate is a big source of black money. In India, a large percentage of land deals are underreported. Whenever you go to a builder to see a flat, you always have to pay from 20 up to 40 percent of the cost in cash. No builder takes 100% cash and they are able to hide a significant part of their income from tax authorities. With demonetization, they will not be able to provide the sources of their illegally acquired money or face heavy penalties.

Also, with the increased use of technology in land records keeping it would make land deals more transparent. Also cases like Adarsh society scam will not happen with all government lands recorded in the system making it difficult for land hoarders to illegally make constructions on them. All these steps would break the builder politician nexus as well resulting in cheaper homes for home buyers. This will bring down the amount of black money in elections as well making it more possible for honest citizens to fight elections.

Benami properties transactions and illicit land dealings have created a stockpile of black money. Real estate goons project lands as agricultural lands and then transfer them as residential and make hefty profits. This whole game of power and political connections has virtually made it impossible for common man to afford house at otherwise affordable rates. But promises of action against benami properties has shocked real estate mafia and caught them unguarded. A considerable decline in real estate pieces proves the effectiveness of the policies enacted by Modi government.

04.Fake Currency Dealers

Another important motive achieved through demonetization is a curb on black money. Pakistan imports more ink and paper than it needs for currency printing for itself. ISI runs fake currency printing presses in Pakistan which is smuggled into India through Bangladesh and Nepal routes.

NIA studies show that fake currency notes worth rupees 400 crore are in circulation in India and a large portion of them are in the form of demonetized currency notes. The fake currency will have to be extinguished or brought into the banking system making their detection possible. In addition to that, the new 500 and 2000 rupee notes have world class security features making their duplication difficult for Pakistan so it’s a way to stay a step ahead of the copiers.

Demonetization move by the prime minister widened the tax net forcing people to make pan cards and adhaar cards and pay taxes. Fake currency is no longer available as a safe option like before and people want to avoid dealing with it. This would have a ripple effect and would reduce corruption and illegal activities in general. People fear Modi may be taking more steps in future to curb black money and hence may not prefer it.

05.Terrorist Organizations

The old notes were copied by Pakistan and used to finance terror in India. The new notes have advanced security features that may not be easy to copy for them for a long time. This is set to give a big blow to terror outfits that use this fake money to fund terrorists and export them to India. Terrorists’ organisations like Hizb-ul-Mujahideen collect money in the form of donations in Pakistan and use Hawala routes to route it into India to carry out terror activities.

With demonetization the Hawala route is broken and it’s not possible for Pakistan to route money into India to spread terror. Their existing currency stacks in India face confiscation or may have to be extinguished. Their fake currency printing machines also printed mostly 500 and 1000 rupees notes that have been demonetised and new notes with advanced features may not be easy to duplicate.

Within weeks of demonetization, Kashmir became a more peaceful place extinguishing the cash from terror outfits. In fact, no internal riots and clashes took place in India for the period after demonetization as a result of cash crunch.