Economic Highlights
New Delhi, 23 April 2018
Cash & Banks
ECONOMY NEEDS FREE RUN
By Shivaji Sarkar
Fetish of any kind is bad. Of late, the
society has started a cleaning operation to the extent that it has blocked many
normal functioning. The phobia of black money, which unfortunately could hardly
be traced except piecemeal, has led to a tormenting situation. Every day a new
order is issued by tax authorities to wash the clean money or give proof that
the money has no taint.
The purpose is to collect more tax. It may
have marginally increased but the government itself has come out in the
Economic Survey that most taxpayers are at the threshold level of around Rs 2.7
lakh annual income. Ideally, this group should not pay the tax and minimum taxable
limit should be raised to Rs l0 lakh.
States need to understand that people are
born to live in a free environ, thrive and a small part of it should be the taxes
not the major part of their income. On an average, an income-tax payee is shorn
off over four months of his earning to pay direct taxes and other levies. The
GST in States like Uttar Pradesh has not subsumed many duties like the excise
and duties.
The State has to understand that it cannot
continuously squeeze people. Forcing them to make purchases through
intermediaries is another decision that hurts the economy. Intermediaries
extract their costs for doing nothing or a facilitation that is not required. Cashless,
now even RSS sarsanghchalak Mohan Bhagvat says, at his Mumbai address, is not
possible.
Cashless means bankisation -- all
transactions through banks, practically an artificial intervention for the
benefit of bankers. The bankers have caused enormous problems in the US, EU and
even Japanese societies. In all these places, the banks have become the worst
extorters. Unfortunately, India has not learnt from the woes of those
communities. No transaction could be faster and cheaper than in cash. Any
intervention is not in the interest of a free economy.
The cash flow interrupted for sometime after
demonetisation. It improved during the last over one year. It did not, however,
happen everywhere. The hinterlands of UP, Bihar, Orissa, MP and Rajasthan Andhra Pradesh, Telangana, Maharashtra, Manipur and Uttarakhand
always had a problem of cash.
Andhra Pradesh Chief Minister Chandrababu
Naidu, in an interaction with journalists during the last Budget session of Parliament
session, said his State was in a critical situation as cash flow has not
resumed to its normality since demonetisation.
The events of the last 15 days testified that
whatever Naidu was saying was correct. It is also strange that whichever party
holds the reins takes up the unpleasant task of defending the indefensible --
the officials who mess up the system.
Authorities are now saying that 16 per cent
of the ATMs across the country are without cash. It seems to be an
understatement. During demonetisation, the banks are on record stating that at
any given time 25 per cent of ATMs are not functional. So the present figure
should be 25 plus 16 that is 41 per cent ATMs are inoperational. That tells
that the country is not yet ready for managing the 2.3 lakh ATMs dispersed in
the remotest parts.
For the past over two months, all banks had
problems in giving wads of Rs 100 or Rs 200 currency notes. Some banks managers
say they were not being given the required currencies as per the normal demand since
January. Worse, nobody within the system tried to study it or was it not done deliberately
to keep it under shroud. Possibly, it was not expected that the situation could
blow up.
The banking system of late has been burdened
with many additional functions, including managing 31 crore Jandhan accounts,
many of which have little deposits. Overall forced demand on banking
transaction has increased. Earlier such burdens were shared by the postal money
order system, direct cash dealings and the minimum dealings through bank pay
orders and many through cheque transfers. Now the online managing of accounts,
transfers, levying penalites and other modes have increased their burden. Even aadhar
operations are being managed by the banks.
The problem accentuates with reduction of
manpower in banks. Secretary, Department of Economic Affairs S C Garg, says
there has been an unusual spurt in demand and supply has not kept in pace. But
is he correct?
“In the current month, in the
first 13 days itself, currency demand increased by Rs 45,000 crore,” the Finance
Ministry said in a release. The government said it is not supplying any
additional Rs 2,000 notes. Around Rs 6.7 trillion of Rs 2,000 notes are in
circulation at the moment. As on April 6, total currency in circulation was Rs 18.43
trillion, compared with Rs 17.98 trillion a few days before the November 8,
2016 note ban.
As per these statements the crunch
is highly unusual and unlikely. If Rs 1 lakh trillion more currency notes are
in circulation, the crunch looks strange. But if SBI is to be believed there is
Rs 70,000 crore shortfall of currency. This means there is some mismatch in the
official statement on availability of Rs 18.43 trillion notes. The SBI research
team says that the demand is at Rs 19.4 trillion and the availability is Rs
17.75 trillion, shortfall of Rs 1.65 trillion.
This raises the question of
sudden spurt in demand. It looks like the demand accumulated and since it was
not being met, it has burst now. This is the harvest season. The demand for
cash for sale on cash is natural. Some attributed it to the ensuing Karnataka
election. But there was no such shortage during the 2014 General elections. So
it looks an overstatement.
A growing economy would need more
cash flow. Suppressing it through official intervention either through the tax
departments’ diktat or any other means hurts the economy. The nation cannot be
servile to tax or any other suppressive system. It is time that the fetish for
cleaning up is given up and let the economy take its own growth route. Checking
water flows by building dams affect its quality. So it is about the economy. If
one puts barriers in the natural growth, it gets stunted.
Let us simplify, reduce direct
tax, raise taxable limits and stop what often is called the taxman’s terror.
Such steps lead to rent-seeking and consequent slowing of the economy. The
nation across political spectrum needs to loosen the control on the economy.
Let it thrive and let the nation grow.---INFA
(Copyright,
India News & Feature Alliance)
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