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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) 

Analysis

Saab is interested in Indian fighter jet deal: Swedish official

The Saab Gripen will be contesting with the likes of the Russian MiG 35, Dassault Rafale, Eurofighter Typhoon, Boeing F/A 18 and Lockheed Martin F-16 for the upcoming deal.

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Rafale deal scam

Amid the raging controversy over the Defence Ministry’s procurement of the Rafale fighter aircraft from French firm Dassault Aviation, a senior Swedish official has said that his country’s firm Saab, in its Gripen aircraft, has the requisite experience to contest for the upcoming Indian deal for manufacturing 110 new fighter jets under the Make in India programme.

“I know that Saab is interested, they want to be a part of this procurement,” Teppo Tauriainen, Director General for Trade in the Swedish Foreign Ministry, told IANS in an interview here.

“They think they have something good to offer that will be of interest to India,” Tauriainen said.

“They, of course, know what the expectations of the government is in terms of local production and cooperation with a local partner.”

India is expected to select by the end of this year one fighter aircraft that will be manufactured by the private sector under the Make in India programme for supply to the Indian Air Force.

The Saab Gripen will be contesting with the likes of the Russian MiG 35, Dassault Rafale, Eurofighter Typhoon, Boeing F/A 18 and Lockheed Martin F-16 for the upcoming deal.

While MiG has already said that it will have state-owned Hindustan Aeronautic Limited (HAL) as its local partner, Indian companies like Tata, Reliance Defence, Mahindra and Adani are in the fray for local partners in the project that is expected to be worth over $20 billion (Rs 1.44 lakh crore).

Tauriainen said that for Saab, contesting for the deal will be nothing new as it has signed a similar deal for Gripen with the Brazilian government with Embraer as its local partner.

“I have myself visited the Brazilian partner, Embraer, and seen there are a lot of spin-offs locally in the Brazilian economy from this fighter jet deal,” he said.

“So, I think for Saab, as a company, it won’t be unusual to do it the way the Indian government wants it to happen.”

During his visit to Sweden in April this year, Prime Minister Narendra Modi had said that defence and security have emerged as an important pillar of the India-Sweden bilateral partnership.

“Sweden has been a partner of India in the defence sector for a long time. I am confident new opportunities for cooperation in this sector will arise in the future, especially in defence production,” Modi said.

During that visit, an India-Sweden Partnership was also announced with a fund of 50 million Swedish kronor (around $5.6 million) for innovation cooperation in the fields of smart cities and sustainability.

Asked what steps have been taken in this connection, Tauriainen said that the dialogue for these projects has started though none of these projects have started operating.

“But we have come quite far to identify areas where we think there is a potential to do cooperation,” he said.

He said that sustainable technology is a broad area and is very much related to how cities are built in terms of transport, energy, waste and waste water.

“There we have some interesting experiences and I hope that is of relevance to India,” Tauriainen said.

“Some technologies we have already tested in Sweden. Other technologies will have to be adapted to Indian conditions,” he added.

In Sweden, waste is actually used to generate power and only one per cent of the waste goes to the landfill.

Asked about the presence of around 180 Swedish companies in India and their role in the Indian economy, Tauriainen said these are doing good business despite “some limitations”.

“They wouldn’t mind if those limitations are taken away. But they are interested in the Indian market and most of them are interested in expanding,” he said.

(Aroonim Bhuyan can be contacted at [email protected])

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Now Congress calls Arun Jaitley ‘court jester’

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Randdeep Surjewala

New Delhi, Sep 20: Hitting back at Arun Jaitley, the Congress on Thursday dubbed the Finance Minister a “court jester” who is “desperate to stay relevant”.

Amid the relentless trading of charges between the Congress and Bharatiya Janata Party (BJP) over the Rafale deal, Jaitley on the day took to social media to accuse Gandhi of “concocting lies” on the deal for the France made fighter jets and the bad loans of banks.

He said the Congress leader was “polluting” public discourse.

Hitting back, Congress spokesperson Randeep Singh Surjewala, in a tweet, called the BJP leader a “court jester” and demanded answers on the Rs 41,000 crore Rafale “scam”.

“And yes ‘Jait-LIE’ ji (sic), the desperate quest to stay relevant of a ‘court jester’ by wasteful blogs continues.

“Please reply: Why hide behind abuse when trapped in Rafale maze? Why supersede HAL for Rs 30,000 crore contract? Why no answer on Rs 41,000 crore loss in Rafale Scam,” said Surjewala in his response to Jaitley’s tweets.

The Congress has been gunning for the Narendra Modi-led government over the Rafale deal. Besides approaching Comptroller and Auditor General of India (CAG) Rajiv Mehrishi for a special and forensic audit and demanding a Joint Parliamentary Committee (JPC) probe into the deal, the party has also sought the resignation of Defence Minister Nirmala Sitharaman over the issue.

The Modi-led government and the BJP have been dismissive of all the charges by the Congress.

IANS

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Rahul Gandhi concocting lies on Rafale, NPAs: Arun Jaitley

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Arun Jaitley

New Delhi, Sep 20: Calling him a “clown prince”, Finance Minister Arun Jaitley on Thursday accused Congress President Rahul Gandhi of “concocting lies” on the Rafale fighter jets deal and the bad loans of banks. The Congress leader was “polluting” public discourse, Jaitley said.

In a Facebook post, he said Gandhi first “lied” on the Rafale deal and was now lying on the non-performing assets (NPAs) claiming that the BJP government had waived loans of 15 industrialists amounting to Rs 2.5 lakh crore. Not a single rupee of any debtor had been waived, he said.

“His (Gandhi’s) strategy is simple, concoct a lie and repeat it as many times” as possible, Jaitley said and wondered whether a person with a “temperament to concoct facts” deserved to be a part of the public discourse.

“The world’s largest democracy must seriously introspect whether public discourse should be allowed to be polluted by the falsehood of a ‘clown prince’,” he added.

Referring to Gandhi winking at his party men after hugging Prime Minister Narendra Modi in the parliament, the BJP leader said the public discourse was a serious activity, not a laughter challenge, and that it could not be reduced to a “hug, a wink or repetition of falsehood”.

“In mature democracies those who rely on falsehood are considered unfit for public life. Many have been banished from political activity because they were caught lying. But this rule obviously can’t apply to a dynastic organisation like Congress party,” he said.

“If the Rafale concoctions were the first big lie, the second one stated repeatedly is that Modi waived of Rs 2.5 lakh crore of 15 industrialists. Every word of that sentence repeatedly uttered by Rahul Gandhi is false,” he added.

Jaitley said the amount being referred to by Gandhi were lent by the banks prior to 2014 when the UPA government was in power, which then “kept rolling over the loans to conceal them (as) loans despite the default”.

“The truth, Mr. Rahul Gandhi, is that your government allowed the banks to be looted. The loans were inadequately securitized. Your government was in complicity… By repeating a lie on several occasions, you can’t change that reality,” he said.

The Finance Minister said while the UPA leaders claimed that when they went out of power, the NPAs were only Rs 2.5 lakh crore. The truth was that NPAs were actually Rs 8.96 lakh crore and were hidden under the carpet as revealed by an asset quality review conducted by the Reserve Bank of India.

He said no effective steps were taken by the UPA to recover or reduce the NPAs and post 2014-15, they increased not because more money was lent but because interest was mounting on the overdue amounts.

“The only effective move which has taken place in this regard is the Insolvency and Bankruptcy Code (IBC). It has changed the debtor-creditor relationship in India.”

He said the Reserve Bank of India had identified the twelve major defaulters who jointly owed about Rs 3 lakh crore to various banks.

“The banks under UPA took no steps to recover these loans. They did not prosecute a single major debtor who had siphoned off money. It is the NDA government which through IBC, changed the debtor-creditor relationship and enabled the banks to effectively pursue the recovery,” Jaitley said.

IANS

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