PC hits out at Centre for not doing homework vis-a-vis notes

Former Union Minister P Chidambaram today slammed the Centre for going ahead with demonetisation without properly understanding and considering the issue and said none of the objectives claimed by the Union government for scrapping the Rs 500 and Rs 1000 notes will succeed.
Targeting the Centre's objectives for demonetising the high value notes, to "root out blackmoney, corruption and taking on counterfeit currency," he gave a point by point rebuttal to substantiate that such goals cannot be achieved.
On black money, he said, "black money is not a stock, it is a flow," wherein black money gets converted into white money or vice-versa with the "velocity of circulation."

He said "if there is a demand for black money you cannot avoid supply of it...If there is demand there will be supply and you cannot root out black money."'
Giving examples like buying or selling of property, he said black money was sought in several situations, "if you want to stop black money, you should target the fountainhead of demand."
That was why, he said even after demonetisation, "the demand for black money continues and so does the supply ... now black money is in the form of Rs 2000 notes which was previously in the form of Rs 1000."

Addressing party workers at a public gathering at the Congress party's State headquarters Sathyamurthy Bhavan, he asked if corruption had stopped because of demonetisation.

He said the first case of corruption after scrapping of notes allegedly happened in "Gujarat's Kandla" and now "corruption happened with Rs 2000 notes."
Coming next to counterfeit currency, he said government had told Parliament that only Rs 400 crore worth of notes were fake and asked how counterfeit currency could be stopped through demonetisation.
"Out of the Rs 17 lakh crore in circulation, Rs 400 crore was only 0.02 per cent of it and to root out 400 crore fake notes, the intelligent people declared Rs 15,44,000 crore notes as not legal tender," he said, amid thuderous applause from party cadres.

"If you have mosquito problem at house, will you burn down your house?," he asked.
"Out of the three objectives, none of it will succeed," he said adding corruption's fountainhead should be blocked, and action must be taken against those demanding black money.
On counterfeit currency, he said "the most counterfeited currency in the whole world is the American dollar."
"I do not know who told the government that such
objectives will be fulfilled," Chidambaram said adding Prime Minister Modi had not fully "listened," or understood the contours of the move before it was announced.
"You (Centre) did not even ask if new Rs 2000 notes can be dispensed from ATM kiosks...These intelligent people printed new notes in new size without even understanding if it can be dispensed from ATMs."

Though more than 40 days has lapsed after demonetisation, still the recalibration of ATMs was not complete. "35 per cent of ATMs are yet to be recalibrated, it is being done, in places where it was done there is no cash."
Stating that without asking basic questions like these, the government had gone forward with demonetisaiton.
To tackle counterfeit notes, he said RBI had come up with measures like recalling notes after five years and bringing in changes like featuring the serial numbers in ascending and descending orders and shifting watermarks.
He said only such measures "is the way out," to tackle the issue and not by scrapping outright Rs 500, Rs 1000 notes.

"Mark my words, counterfeit Rs 2000 currency will make its way in just a year, because it cannot be stopped...It is just the same machine."
Explaining the travils of the people in getting money from ATMs, he said out of the 2,15,000 ATMs, North Eastern States had just 5500.
"Out of the eight NE States, Assam has 3,500 and the rest just 2000, imagine the distance between one ATM and the other. There is a big upheaveal in North eastern states without no cash," he said.
He said comparatively Tamil Nadu stood on a better footing with more ATMs while states like Bihar had far less.

Without analysing such basic factors, government went ahead in a "hurry" and now they are "flummoxed."
He said government had not understood such basics of economy, and added that as a result "86 per cent notes were scrapped."
In the past several years only four countries had announced demonetisation. "Zimbabwe, North Korea, Libya and now Venezulea have done that. We claim to be a developing economy which is the fourth largest economy and now India should be bracketed with such countries."
He said 100 economic experts like Amartya Sen had said demonetisation was a foolish move adding "there is no answer to such expert views."

He said "black money cannot be rooted out by declaring all cash as black money.