A WAR AGAINST CORRUPTION AND BLACK MONEY

The Prime Ministers strongest action against corruption and black money by de recognising High Denomination Notes is a historical step. The de monetisation of Rs. 1000 and Rs. 500 Rupee notes on 8th November has brought India on the centre stage of discussion and acclamation worldwide. The Indian economy has seen major impact of this decision and rampant money laundering exercise has been observed by the entire system:

• Gold and Diamond brisk sale in first 7 days at hefty premium 
• Heavy import of Gold officially as well as through other channels 
• Transactions in Real Estate at official price in large numbers at hefty premium
• Currency Mafia became active exchanging old HDN notes with new currency 
• A large number of bankers and unprofessional middleman contributed to the Chaos of common man by contributing to the currency Mafia 

The deposit of old currency in bank accounts also picked up substantially and it looks likely that the entire money in circulation will get deposited by 30th December 2016, barring a small percentage to walk in through RBI exchange route in Jan- March 2017. The message from the government is loud and clear that " Na Khaunga Na Khanne Doonga". The real war against the menace of black money got strengthened by the nation wide support to the great initiative. The issue being debated is as to what will be the implication of this move. The following clear indications are coming:

• A higher tax collection voluntarily from a larger number of new and existing assessees 
• A reasonably large voluntary disclosure in new scheme of 50% tax and 25% deposit
• A large additional bank deposit base leaving about 400,000 Crores to 600,000 crores 
• The M 3 ( Money Velocity ) of 6 to 10 times to create substantial additional resources for the system An expected reduction of interest rates by 300 basis points ( 3%) lowering EMI and interest burden Big push to Housing, Automobiles, Steel, Cement and infrastructure sector 
• Revival of Non- performing assets ( Bank Loans) with a lower interest burden will ensure sustainability for larger number of borrowers improving potential for debt restructuring, one time settlement and waiver of accumulated high interest burden 
• GDP growth to marginally slow down in 5 months ending 31st March 2016, followed by a GDP growth rate crossing 10% in 2017-18 
• Less cash economy initiative will require lesser currency issuance by Government 
• Significant reduction in public debt and interest rates (Yield to maturity) will reduce burden on the Government and will reduce deficit financing substantially 
• Significant reduction in Bank Deposit rates , except for senior citizens and special classes 
• A major reduction in Income Tax rates and upward revision of exemption and taxation slabs
• The Government can even consider a lower GST middle rate at 4% lower in the announced rate of 12% and 18%. The Excise duty rates and Service tax rates can be immediately cut  pending the GST implementation, which is likely to take some more time in consensus building
• Mandatory electronic interface between tax assessee and tax officials has already been announced. In case it is implemented in direct and indirect taxes this year, a major blow to hit corruption can be achieved.                                                                                                                                                                                                                                                                 The persuasive approach of Prime Minister has distinguished clearly between the honest and dishonest tax payers. The incentive to hoard cash will also wane away in the course of time. The properties will become affordable even by the honest. Several other sin in the society will get a big hit for example dowry, lavish expenditure on marriages, unnecessary spent and accumulation of jewellery and so on. Even the terrorism and other crimes will reduce with more and more cash less economy.

Can we achieve upliftment of common man, make in India and evolution of India as number one economy will depend on how fast we move along with Prime Minister and take his initiative forward. The complete eradication of black money will depend on determination of the society leaving a better honest economic system to the next generation.