Kolkata, November 9: Terming Narendra Modi-led BJP government’s decision to demonetise higher denomination notes as “abrupt” and “chaotic”, a noted economist on Tuesday said the step has given a “negative shock” to the nation, but would have no impact on black money circulating in the country.
Referring to an earlier instance of demonetisation carried out in the country, Abhiroop Sarkar, Professor at Indian Statistical Institute, said: “It had no effect on the circulation of black money. Actually, the very premise that demonetisation will help in removing the menace is wrong.”
“That’s because people don’t stack black money in cash. Rather, they stash it in undisclosed accounts in Swiss Banks. So demonetisation won’t affect the big fish,” said Sarkar.
Sarkar said during Narasimha Rao’s prime ministerial tenure, there were allegations that Rs 1 crore had been paid to him in cash as bribe. “Then it was measured that a big suitcase was needed to pay Rs 1 crore in cash. Now considering the black money circulating in our country, Rs 1 crore is a small amount. If you want to trap the big black money holders, you need to look at sums of Rs 100 crores.
“But is it feasible for them to horde such big amounts in cash? That doesn’t make sense,” he said.
“This can at base net some minor players.”
In 1978, the Janata Party government of Prime Minister Morarji Desai had demonetised currency notes of Rs 1,000, Rs 5,000 and Rs 10,000.
“But that was not done so abruptly. In the present case within a few hours notes of denomination of Rs 500 and Rs 1,000 have become illegal. That has only led to a chaotic situation. People are confused. It has come to the nation as a negative shock.”
Sarkar said when a government comes out with a voluntary disclosure of income scheme to net black money, the exchequer gains in the form of additional revenue. “But when you demonetise, the government does not get any revenue. So the government does not benefit.”