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‘Demonetisation design is flawed; Currency shortage could result in recessionary conditions’

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Arun-Kumar-economist,-ex-JN

New Delhi, February 22: One of India’s leading experts on the black economy, who has studied, written about and lectured extensively on the phenomenon for nearly four decades, has said that the demonetisation design is flawed, the objective has not been achieved and there is a very real danger of the shortage of currency translating into recessionary conditions as the economy continues to suffer.

“While the objective of dealing with the black economy and terrorism has not been achieved, the economy is suffering. Any move to check the generation of black money should have been targeted at those who generate it without hitting others. It will not have any long-term impact on the black economy,” noted economist Arun Kumar, who taught at Delhi’s Jawaharlal Nehru University (JNU) from 1984 to 2015, told IANS in an interview.

“Events in the last three months show that demonetisation cannot tackle the black economy since cash does not mean black. Hence, the design of the policy move is basically flawed. While the notes shortage will dissipate slowly in the coming months, the slowdown in the economy is not getting less. Thus, the problem is transforming from notes shortage to recessionary conditions in the economy,” said Arun Kumar, who played a role in drafting the Janata Party’s manifesto ahead of the 1989 Lok Sabha elections.

Arun Kumar’s book “Understanding the Black Economy and Black Money in India” (Aleph/Rs 399) argues that the Narendra Modi government’s sudden demonetisation of Rs 500 and 1,000 notes in November 2016 “failed to put a dent in the black economy but caused untold hardship” to hundreds of millions of Indians.

He said that cash is a stock and its removal, even temporarily, does not mean that the generation of black income by various devices will stop. “The black and the white economy are not parallel and the same currency circulates the black incomes as the white incomes; so any black cash demobilised would soon get regenerated,” contended the author, who was educated at Delhi University, Princeton University and JNU.

He, however, agreed that the government is trying to take supplementary steps but said that their impact has to be dealt with separately. “Moving towards a cashless economy can be dealt with independent of demonetisation and should be evaluated separately. If raids are to be conducted to unearth black money, that also can be done independent of demonetisation. The two should not be linked with each other,” he argued.

Arun Kumar lamented that India’s black economy results in policy failure and tremendous inefficiency, in continuing poverty and unfulfilment of national goals.

What then is the reason behind the enormous presence of black economy in the country?

“Since the black economy is now 62 per cent of GDP, it implies illegality in 62 per cent of economic activity. It can only be so large if the black economy is systematic and systemic. This is only possible if the state apparatus is a party to the process of committing illegality and generation of black incomes. Thus, the involvement of the policymakers (politicians) and the implementer (executive) is needed along with the businessman,” Arun Kumar quipped.

There have been dozens of committees and commissions in the last 70 years that have gone into various aspects of the black economy. They have given thousands of suggestions and hundreds have been implemented and yet the black economy has been growing.

Demonetisation is not the first step taken. The problem has to be tackled politically, so that the triad (involvement of politicians, executive and the businessmen) is dismantled. Even if one of its three arms are severed the problem will begin to dissipate.

“This requires accountability from each of the wings and that will only take place when movements force them to do so. It will not happen by anyone’s goodwill but would be triggered by change in the consciousness of the people of the country,” Arun Kumar said.

He expects the readers of this recent offering to understand the political nature of the black economy and not think that there is a “magic wand” which can instantly solve the problem.

“In this sense, there are no immediate solutions and everyone has to work to strengthen democracy in the country so that accountability is brought about. The more people understand this and the more they oppose it politically, the quicker the problem would be solved,” he added.

“Understanding the Black Economy and Black Money in India” attempts to tell its readers why the November 8 gambit failed.

By Saket Suman (IANS) 

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FIR lodged against Shia Waqf Board chief for hurting sentiments of Sunnis

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Mumbai, Dec 18 : An FIR has been registered at JJ Marg police station against Uttar Pradesh Shia Central Waqf Board chief Waseem Rizvi by a Mumbai based organisation Raza Academy, for allegedly hurting religious statements of Sunni Muslims.

Earlier, the case was lodged against Rizvi on the basis of a complaint of the Sahaba Action Committee at Lucknow ‘s Chowk Police station.

In the complaint, the Sahaba Action Committee claimed that Rizvi had offended the members of Sunni sect of Islam by his remarks over their Caliphs.

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India

India retaliates after Pakistan violates ceasefire along LoC in Poonch

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Pulwama encounter

Srinagar, Dec 18 : India is strongly retaliated after Pakistan Army resorted to heavy mortar shelling    along the Line of Control (LoC) in Poonch sector of Jammu and Kashmir on Tuesday.

Pakistan Army  violated ceasefire by indiscriminate firing with small arms, automatics, and mortars .The troops guarding the borderline retaliated and the  exchange of fire was continuing intermittently  when last reports came in. The unprovoked firing from Pakistan side began in the evening.

On December 12, an encounter broke out between militants and security forces in Sopore area.

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US pullout from INF Treaty may ruin arms control system: Putin

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Putin

Moscow, Dec 18 Russia will have to take additional measures to boost its security if the US withdraws from the Intermediate-range Nuclear Forces (INF) Treaty, Russian President Vladimir Putin said on Tuesday.

US withdrawal from the INF Treaty may ruin the entire arms control system, said the Russian President.

“Such a step will have the most negative consequences, and will noticeably weaken regional and global security,” Putin said while speaking at an extended meeting of the Russian Defence Ministry board, Xinhua news agency reported.

“In fact, in the long term, the talk is about the degradation and even collapse of the entire arms control architecture and the non-proliferation of weapons of mass destruction,” he added.

For a long time, the US has been using unsubstantiated accusations that Russia had violated its obligations under the treaty as a pretext to withdraw from it unilaterally, thus violating the treaty itself, Putin said.

He agreed that the INF Treaty did not involve other countries which have medium and shorter range missiles.

“But what prevents us from starting negotiations on their accession to the current agreement, or starting to discuss the parameters of a new treaty?” Putin said.

The treaty, in modern conditions, plays the role of a stabilising factor, which allows maintaining a certain level of predictability and restraint in the military sphere, he said.

He recalled that the INF Treaty signed in 1987 involved the elimination of medium-range and shorter-range (500-5,000 km) ground-based missiles. At the time, the USSR had no other missiles, while the US had sea-based and air-launched missiles.

Russia, since the signing of the treaty, has developed sea-based and air-launched missiles, which was the cause for Washington’s concern, Putin said.

According to Putin, it will not be difficult for Russia, if necessary, to create appropriate land-based systems as a response to the US withdrawal from the INF.

However, Russia is always open to any proposals and initiatives that lead to the strengthening of universal security including the prevention of a new arms race in the interests not only of Russia, but of the US and the whole world, Putin said.

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