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Analysis

Demonetisation failed litmus test as most banned notes returned

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(‘Note-Bandi: Demonetisation and India’s Elusive Chase for Black Money’ is an upcoming book from Oxford University Press dedicated to the “memory of Indian citizens who lost their lives due to demonetisation”). Excerpts from a chapter.

The litmus test for the success of any demonetisation is the amount of cash that does not return to the banking system. For long, economists and observers were intrigued by the refusal of the RBI to share data on SBNs (Specified Bank Notes) returned to banks after December 10, 2016.

Information on SBNs returned was important because any amount not returned to the banking system was supposed to be ‘black money’, which could be ‘extinguished’ by the RBI… Consequently, the RBI could pass over an equivalent amount to the government, which in turn could spend it for welfare purposes.

The government’s expectations were shared by the Attorney-General of India, Mukul Rohatgi, with the Supreme Court. According to Rohatgi, the government did not expect more than Rs 12 lakh crore to be returned to the banks, which implied that about Rs 3 lakh crore worth of ‘black money’ was to be extinguished and passed over to the government.

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As demonetisation proceeded, these hopes stood belied. To begin with, (RBI Governor Urjit) Patel was forced to clarify on December 7, 2016, that “the withdrawal of legal tender characteristic status does not extinguish any of the RBI balance sheets … They are still the liability of the RBI”.

On December 8, Revenue Secretary Hasmukh Adhia told journalists that “the expectation is that the entire money which is in circulation has to come to the banking channel”. In other words, the pace at which SBNs were being returned to the banking system had convinced the government that there would be no currency left to extinguish. By December 10, Rs 12.44 lakh crore worth SBNs had already returned to the banking system.

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The government staunchly refused to share any figure on SBNs returned after December 10. Instead, it attempted to obfuscate facts and confuse the public with convoluted stories of ‘double counting’. On December 15, (Economic Affairs Secretary Shaktikanta) Das told the media that data on SBNs returned were being withheld because the RBI suspected ‘double counting’ of currency notes.

Das’ statement was soon shown to be wrong.

There were two ways in which returned SBNs could be counted. One, through the simple addition of the cash position of individual banks with respect to the SBNs returned. There could be double-counting here, as banks without currency chests may have deposited cash with banks that had currency chests.

Two, directly from the currency chests, in which case there was no scope for double-counting. (Deputy Governor of RBI Usha) Thorat, in an interview, pointed out that “there is no question of double counting… RBI only looks at the currency chest data”.

In an interview with the Economic Times, Rajnish Kumar, the Managing Director of the SBI, further clarified this in no uncertain terms: …currency chest position is the correct position, there cannot be any flaw in that … double counting can only happen if the individual banks and post offices are reporting the deposit position … but [in] currency chest reporting which is done every day and which is an automated process, the possibility of any discrepancy does not exist … If the Reserve Bank has given the number based on the currency chest position, then there should be no discrepancy. But if the data is given on the basis of daily reports of deposits being given by the bank, then there is a possibility of some double counting.

In its regular media briefings, the RBI was indeed providing SBN data from currency chests and not by adding the cash positions of individual banks. The RBI’s Deputy Governor R. Gandhi told the media on December 13, 2016, that “specified bank notes of Rs 500 and Rs 1,000 returned to the RBI and currency chests amounted to Rs 12.44 lakh crore as on December 10, 2016 “.

Yet, the RBI was to state on January 5, 2017, that “figures [on SBN] would need to be reconciled with the physical cash balances to eliminate accounting errors/possible double counts”. The effort, clearly, was to hide.

It was only in August 2017 that the RBI, ultimately, released the final figures of the SBNs returned. According to the RBI’s Annual Report for 2016-17, out of the Rs 15.44 lakh crore worth of currency in circulation as on November 8, 2016, Rs 15.3 lakh crore had returned to the banking system as on June 30, 2017. In other words, 98.96 per cent of the SBNs was back in the banking system and only 1.04 per cent of the SBNs remained outside.

The verdict was finally out: As most critics predicted, demonetisation had failed to extinguish any amount of money that could be alleged as ‘black’.

By R. Ramakumar

DISCLAIMER : Views expressed above are the author’s own.

(R. Ramakumar is Dean, Centre for Study of Developing Economies, School of Development Studies, Tata Institute of Social Sciences, Mumbai. He can be reached at [email protected])

Analysis

Ministry says yoga is not sport, but DU colleges still reserve seats

Colleges have autonomy to choose the sports under which they wish to give admissions. University cannot tell a college to pick a specific sport. It is their discretion. These sports do not come under Sports Ministry, nor are they regulated by it.

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New Delhi, June 12 (IANS) Is yoga a sport? The Ministry of Youth Affairs and Sports (MYAS) says it is not. Yet, 11 Delhi University (DU) colleges have this year reserved seats for the discipline under their sports quota.

The university and the colleges, meanwhile, have been shifting responsibility back and forth.

After recognising it as a sport in 2015, the MYAS reversed its decision the next year. “After elaborate discussion, it was concluded that yoga has various dimensions/arms in which competitions are not possible. Hence, it was agreed that Yoga cannot be termed a sport. Consequently, it may not be appropriate to recognise any organisation as NSF (national sports federation) for yoga,” the Sports Ministry had said in a letter dated December 21, 2016, to all national sports federations and the Indian Olympic Assocation.

“It was also agreed that the entire matter relating to yoga will continue to be handled by the Ministry of AYUSH,” the letter said.

When IANS contacted the DU Sports Council for a clarification, it said that the colleges had requested the university to conduct yoga trials.

“Yes, Yoga has been under sports quota and it has been there in previous years also. Last year, 19 colleges had applied for trial for Yoga under sports quota. The decision, in which sports admissions are to be made, are taken by the colleges,” Anil Kalkal, Director of the varsity sports council which conducts the centralised trials for sports quota on behalf of colleges, told IANS.

“Colleges have autonomy to choose the sports under which they wish to give admissions. University cannot tell a college to pick a specific sport. It is their discretion. These sports do not come under Sports Ministry, nor are they regulated by it,” he said.

Although colleges are entitled to choose a sport for trials and reserve seats under it, the list of sports from which they are to choose is compiled by the varsity.

Kalkal cited another factor in the form of inter-university competition, held by the Association of Indian Universities (AIU) — a non-governmental body listed under the Societies Act — as one of the reasons for considering Yoga as sport.

“If such was the thing (de-recognition) why would AIU conduct the yoga competition? The day AIU will tell us that Yoga is not a sport and stop conducting the competition, we will stop taking admission under it,” he said.

“If colleges are requesting to admit students under yoga, what can the university do? We have to conduct the trials. You should ask the colleges why they requested us to conduct yoga trials,” he said.

An official from one of the colleges which has reserved seats for Yoga this year, when contacted, passed the buck to the university.

“We consider Delhi University and AIU the governing bodies. If an activity is listed as sport by the university, we follow that. If DU tells us that it will not conduct trials in yoga then we will also give it up. Government doesn’t have a role in it,” M.P. Sharma, sports Convener at Hansraj College, told IANS.

Ambiguity on the legal sanction of quota for yoga got further worsened when an AIU official conceded that the association itself didn’t consider yoga as a sport.

“The competition is there because it helps in maintaining your body, mind and spirit. We do not consider it sport. This is not a sport. But we conduct the competition to improve the standard of performance,” said AIU Joint Secretary (Sports) Gurdeep Singh.

Singh also conceded that association’s decisions are not binding on the university.

“We have nothing to do with the DU sports quota. DU follows its own constitution. You talk to DU for this. A collective decision is made by our sports board. Whatever is in the larger interest of students, we do that. It’s not a sport but an activity, which helps strike a balance. The entire world has recognised the value of yoga, I don’t know why only here people have an issue with it,” he said.

However, in spite of what Singh said, the AIU website lists yoga as a sport in its “Calendar of Events” for 2017.

Although it is a thing which has been going on for years, some DU teachers, when apprised of the matter, called the decision (listing of yoga as sport by the university) as “arbitrary”, stating that it was never presented before the Academic or the Executive Council of the university.

“As far as reservation of seats under sports quota is concerned, we have an understanding of reserving them for only those sports which are recognised in Olympics. On what basis can they include yoga in it? asks Rajesh Jha, a DU professor and Executive Council member.

“This will end up undermining the chances of admission of those who are trained in genuine sports. This seems like a completely arbitrary decision,” he added.

Trials for yoga are scheduled to be conducted later this month.

Apart from Hansraj, Gargi College, Deshbandhu College, College of Vocational studies, and Kalindi College are few of those which have given their names for yoga trials and have reserved seats under the activity.

(Vishal Narayan can be contacted at [email protected])

— IANS

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Analysis

Global cues, inflation to dictate equity indices trend

The Central Statistics Office (CSO) is slated to release the macro-economic data points of IIP and CPI (Consumer Price Index) on June 12.

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Mumbai, June 10 : Monetary policy announcements by global central banks coupled with the upcoming release of major macro-economic data points on industrial production and inflation are expected to set the trend for the domestic equity indices.

According to market observers, other key factors such as rupee’s movements against the US dollar and fluctuations in crude oil prices as well as developments on monsoon’s progress will impact investors’ risk-taking appetite.

“Next week will have a flurry of economic data for India,” Devendra Nevgi, Founder and Principal Partner, Delta Global Partners, told IANS.

“A negative surprise in inflation data would reinforce the hawkish stance of RBI. A weaker external sector data would have an impact on INR, especially during a negative EM (emerging markets) sentiment. IIP (Index of Industrial Production) would be watched closely for an ongoing economic expansion.”

The Central Statistics Office (CSO) is slated to release the macro-economic data points of IIP and CPI (Consumer Price Index) on June 12.

Subsequently, other major macro-economic data points such as WPI (Wholesale Price Index), Current Account Deficit and Balance of Trade figures will be released.

On the global front, monetary policy announcements by the US Federal Reserve, ECB (European Central Bank) and the Bank of Japan (BoJ) will form major themes for the upcoming week.

“The US Fed rate move and language will set the tone for sentiment in EM as well Indian markets. The key is whether the US Fed pays attention to the vulnerable EM situation,” Nevgi said.

Besides, the movement of Indian rupee against the US dollar and fluctuations in global crude oil prices will also set the course for the key indices.

On a weekly basis, the Indian rupee weakened by 45 paise to close at 67.51 against the US dollar from its previous close of 67.06 per greenback.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors bought scrips worth Rs 1,367.22 crore during the week ended June 8, 2018.

Figures from the National Securities Depository Ltd (NSDL) revealed that foreign portfolio investors (FPIs) invested equities worth Rs 3,757.94 crore, or $560.40 million, in the last week.

Additionally, technical charts show that the National Stock Exchange (NSE)’s Nifty50 remains in an intermediate uptrend.

“Technically, with Nifty recovering from the lows of 10,552 points, the intermediate trend remains up,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

“Further upsides are likely in the coming week once the immediate resistances of 10,814 points are taken out. Crucial supports to watch for any weakness are at 10,618 points.”

Last week, the key Indian equity indices — the S&P BSE Sensex and the NSE Nifty50 — rose on the back of Reserve Bank of India’s “neutral” stance on a future rate hike trajectory, along with its reform measures for the realty, bond and banking sectors and value buying.

Consequently, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 216.41 points or 0.61 per cent to 35,443.67 points on a weekly basis.

Similarly, the wider Nifty50 of the NSE closed last week’s trade at 10,767.65 points — up 71.45 points or 0.67 per cent — from its previous close.

(Rohit Vaid can be contacted at [email protected])

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Analysis

CBDT says RTI replies on ‘write-off’ of IT arrears were ‘erroneously sent’

According to the RTI replies, the Pr-CCIT, Hyderabad had stated that it had written off a total of Rs 3002.20 crores in two financial years, 2016-2017 and 2017-2018.

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Mumbai, June 1 (IANS) In an apparent volte-face, the Central Board of Direct Taxes has said that figures of ‘write-offs’ of Income Tax arrears furnished under right to information action were sent out in error.

Responding to an IANS report “Income Tax Department writes off huge arrears, show RTI replies” on May 28, 2018, the CBDT’s official spokesperson said that the the Principal Chief Commissioner of Income Tax (Pr-CCIT) Hyderabad had provided erroneous figures of ‘write-offs’ under an RTI application filed by Chandra Shekhar Gaur, a Neemuch (Madhya Pradesh) activist.

According to the RTI replies, the Pr-CCIT, Hyderabad had stated that it had written off a total of Rs 3002.20 crores in two financial years, 2016-2017 and 2017-2018.

The CBDT spokesperson, Surabhi Ahluwalia, Commissioner of Income Tax (Media & Technical Policy) now says that the information provided was “due to an inadvertent error made by the CPIO who reported the figures of ‘Cash Collection’ or recoveries made from arrears in these years as the figures of arrears written off.”

The correct amount of arrears written off in those two years for the Andhra Pradesh & Telangana by the Pr-CCIT Hyderabad, was actually zero (Nil), as no write-off orders were passed in these (two) years, he said, adding that the RTI applicant Gaur has been informed of the mistake.

Interestingly, the IANS had sent an email to the CBDT on May 16, with specific queries on the figures and the authorisation levels for the ‘write-offs’, which was ignored for nearly 13 days.

After the IANS story was published on May 28, the CBDT swung into action with a reply.

On the figures of tax arrears, totaling to over Rs 50,000 crore, including over Rs 33,157.97 crore from Pune alone, provided under RTI by various IT offices across India, the CBDT spokesperson said it had already collected Rs 44,633 crore during 2017-2018, which was 14.6 percent higher than Rs 38,944 crore collected in the previous fiscal.

Besides, the CBDT said of the current demands, Rs 52,537 crores was recovered by the ITD in 2017-2018.

The CBDT reiterated that ‘write-off’ of arrears was a detailed and long-drawn process and only initiated for arrears which become irrecoverable “after all avenues for recovery are exhausted.”

Besides, all proposals of ‘write-off’ of arrears above Rs 5,000 are examined by a committee at Zonal, Regional and Local levels, while any proposals for ‘write-off’ above Rs 25 lakh must “be approved by CBDT” and any such amount above Rs 50 lakh need approval “by the Finance Minister.”

For small value arrears upto Rs 10,000, there are relaxations in guidelines under a fast-track process, but the rigorous process remains in place and during 2017-2018 (upto December 31, 2017), a meager amount “of Rs 5.6 crore was written off in the entire country, the spokesperson said.

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