On 8th November, I wholeheartedly supported Modi as he declared his mega demonetization scheme. I also believed it was a huge move towards wiping off the black economy. But from the very beginning, I have been saying it will only wipe off "black cash" (I never used the terms black economy or black money).
I further explained that black cash is far lesser in comparison to the black economy, since black cash has a very high velocity of money – which means it changes hands far faster than normal money and therefore much lesser cash can create a far bigger economy than what white cash can.
The demonetization move needed to be backed up by many other moves to end the black economy. Unfortunately, more than a month later, till now the other moves are invisible; and black cash, instead of disappearing, is the first that got converted into new notes, while ordinary Indians stood in long queues thinking they were sacrificing for the nation. Their misery was made further hilarious through immature sloganeering around making India cashless (a ten year vision towards it would make sense not a ten day, daily changing flip-flop plan), giving them laddoos to stand in the queue, horrendous mismanagement of the availability of 100 rupee notes etc etc etc.
The question is, is all lost?
My answer is no. I still believe this entire move – even if it's true that a few industrialists or ministers already knew about it – was well intentioned. And it was a good plan. At such moments, I keep going back to one of my favorite films, 'The Ghost and the Darkness'. Val Kilmer, the protagonist, makes an elaborate trap to kill the two lions that were causing mayhem in Tsavo, Kenya.
The trap fails. His friend Michael Douglas tells him that a plan failed, doesn't mean it was a bad plan... In fact, at a later stage, when he again fails to kill the lions and is almost dead himself, Michael Douglas says something more memorable, and I quote... "Everybody's got a plan... until they've been hit... and you, my friend, have just been hit... The getting up's up to you..."
Let me be very frank here. Narendra Modi has been hit. He never expected this kind of all round criticism and backlash around his drive. So much so that, even, Manmohan Singh started speaking! However, I must also add, the getting
up is up to him.
And I believe the way forward is by getting up as Narendra 'Robin Hood' Modi.
So, here are the 7 things that Narendra Modi can do and become immortal as Narendra 'Robin Hood' Modi:
1. He must sound human. He must explain in his 'Mann ki baat' how he meant good but he realizes that the media and his predecessor Manmohan Singh have a point when they say it has been mismanaged. He needs to admit he should have had better management and show his sadness at the amount of black cash that has been allegedly converted into white in connivance with bank people, something that he never expected. And he has to say he is just getting warmed up and will not leave any corrupt person that easily.
He might have lost this battle but he will win the final war against corruption. He must also thank the Indian ethos of tolerance, adjustment and compromise that actually helped him get away with much lesser damage to his image than it would have, had it been any other nation. We Indians have seen the worst and are capable of adjusting endlessly. And that's, why without any riots, bloodshed, or any major protests, he could pull off his ill-managed plan.
Modi must never forget the power of an apology and being humble. Arvind Kejriwal joined hands with Congress, lied swearing upon his children and messed up his first stint. He came back with an apology. It was a third class one. But it did its bit. People thought they were at fault and they needed to give him a bigger mandate. And they gave him the biggest ever.
2. Modi must immediately announce new steps to get rid of the black economy per se, instead of just black cash, which is just 5% of total cash – though it probably runs a parallel economy almost comparable to our white economy. Explaining further, black economy is not just black cash present in India. Black economy is:
*Black cash stored abroad.
*Black money stored in land.
*Black money stored in gold.
*But above all else, black money used for buying and selling of shares through hawala and promissory notes route.
And for each of these four, he can have simple rules.
For black cash stored abroad, he should declare an amnesty scheme. Charge a nominal 15% tax and let everyone get back their money. No questions asked. And clearly say those who still fail, this time they would have the worst time of their lives. After demonetization, only a fool wouldn't believe him. It's far simpler than coaxing countries to reveal names of Indians having accounts. When Switzerland reveals the names, money is shifted to Dubai and when Dubai reveals the names, money gets shifted to Luxembourg. So a practical, non taxing, tax scheme should be announced to incentivize people to get their black money back to India. The amount of production it will generate and the resulting taxes earned by the government will easily make up for the initial low tax.
For black money stored on land, all land records must be digitized. That will be the end of the game. Else, changing records by bribing patwaris will continue forever.
For black money stored in gold, again, an amnesty scheme should be announced, where government bonds of 85% value of the declared gold should be given to all those who declare and surrender their gold reserves.
Post that, gold should be totally sold on the basis of the Aadhaar card or a central identification code/biometric card that would link all bank accounts, wealth, land, cars for everyone – a card that even has every Indian's finger print mapped along with the biometric of eyes so that even crime can be checked.
Black transaction in shares is the biggest scam in the country and the toughest to catch; even if one brings out laws to control the same, where there is a will, there is a way. This would require many laws; however, a lot could be done by making it mandatory to reveal details of original shareholders of companies through which money is brought back into India, specially through the promissory notes' route.
Well that's about black economy and corruption, the plank the common man relates to and understands the most.
In fact, since 1994, I have been advocating a very low tax or zero income tax regime so that the concept of black money is almost removed. Let there be indirect taxes, GST and even corporation taxes etc. What pinches people is personal income tax. And hardly a handful of Indians pay income tax, and we get a miniscule revenue from it. Lowering of corporate taxes could also be another inventive Modi can think of to see to it that the money brought into India is not kept idle and instead is used for productive purposes.
Lastly, a second round of a "very well planned" demonetization should be planned soon, where all the current 2000 and 500 rupee notes should be banned and the highest denomination available should be 100 rupee notes so that storing black cash becomes a nightmare. One can even think of making coins of 100 rupees instead of notes to make the entire process cumbersome and indirectly making people go for digital transactions. Notes should be allowed only till 50 rupees. Of course, along with this if the government is really serious about a cashless economy they need to see to it that there is a major ramp up of POS machines from the pathetic current numbers of 15 lacs to about 500 lacs (given that mobile phone internet cant be the only source of dependence for monetary transactions due to the poor network and affordability factor). if these 'Point of Sale' machines are unavailable in shops/payment points, how can one make card payments and go cashless.
3. Corruption can never be removed without transforming the judiciary. Modi must announce sweeping changes in the judicial budget allocation and implementation.
The Lokpal has been given its silent burial with a completely manipulative and flawed bill. Though the Lokpal bill at its ideal best had the power to make a big impact to deter corruption, I never believed that this was the first priority when it came to tackling corruption. The first priority, as I also told Arvind Kejrival during one of our interactions, has to be necessarily a massive focus on judicial reforms. Unfortunately, most people don't understand its real relevance; and those who do, are sitting in power and thus keeping it dysfunctional so that the corrupt can make merry! If Modi is really keen to change this country and make an impact in the field of reducing corruption, he has to awaken the sleeping and completely dysfunctional judiciary of this country!
Can you believe we allocate less than 1% of the Central and State budgets every year for the judiciary. In the Ninth Five Year Plan, the government set aside Rs 385 crore for the judiciary. That works out to 0.078% of total plan expenditure. In the tenth Five Year Plan, the allocation was increased to Rs 700 crores; about 0.071% of total plan expenditure. In the Eleventh Five Year Plan, which is in progress, the allocation was ‘generously' raised to Rs 1470 crore. As a percentage of total plan expenditure, things haven't improved at all. These figures are so laughably small that I marvel at how the judiciary functions at all!
All this, while new laws, amendments to existing laws, a massive increase in corruption and the rise of activism have led to more and more cases piling up even as old cases continue to languish. As I stated earlier, and have often stated in the past, the only way to reduce corruption in India is to make the judiciary more effective. Till the corrupt remain convinced that they can either escape punishment or delay it indefinitely, corruption will continue to increase. The one and only solution for corruption is a functional judicial system. Corruption and greed are globally prevalent, yet it touches far less lives in the USA than in India simply because the American judicial system is functional and ours is dysfunctional. In America, they have ten times more judges per million people than in India. If we are to try and achieve such standards, we need to have about 100,000 more judges. It sounds huge but is surely achievable in a span of five years. And to have 20,000 additional judges per year, we have to budget for an additional amount of approximately Rs.6,000 crores per year, assuming that the expenses around a judge and his office assistants put together is definitely not more than Rs.30,00,000 per year.
So I would suggest that Modi should use the upcoming Budget to announce that Rs 6,000 crores have been allocated for the judiciary in the coming fiscal, with a commitment to increase it to Rs 10,000 crores in the next fiscal. India desperately needs such a big ticket and transformational move. Modi must unveil a concrete plan whereby the Law Ministry works with Supreme Court and High Court judges to draw up firstly a concrete blueprint to “quadruple” the number of judges and courts before the general elections in 2019; and secondly, to draw up a blueprint that will compel litigants, lawyers and judges to commit to a time frame to settle cases. First, this will send a huge message to voters that the government actually means business. Second, it will actually transform governance in India. If those facing corruption charges know that they could be convicted in less than a year and their property confiscated and auctioned, as it has started happening in some isolated cases, the incentives for corruption will vastly diminish, if not disappear altogether. This is far more important than making noise about a Lokpal. This is very doable. No progress was made for almost two decades in Bihar when it came to tackling corruption cases. Then Chief Minister Nitish Kumar set up fast track courts; and lo and behold, the corrupt actually started getting convicted quickly.
These massive allocations for the judiciary will ensure that ‘fast track' courts do not remain exceptions but become the norm in the Indian judiciary.
4. He must use the Jan Dhan Yojana to now distribute back the money collected to the poor through easy loans. If not that, automatic deposits of a sum as low as 5000 rupees a month each to the Jan Dhan accounts of all the poor that have been opened would make him India's and the world's first real Robin Hood.
This scheme should be implemented through direct bank transfers. Any family that has less than Rs 5000 monthly income should be given the differential either through MGNREGA or a direct transfer.
It should be given like an unemployment allowance in form of a poverty allowance.
Then he can show that unlike what people fear, the money was not collected to redistribute it back to the rich through low interest loans. Because that's what people are fearing. They feel that at least six months' worth growth is lost, lots of employment lost, and worse, scores of people getting a decrement this year on the pretext of demonetization. The fact is that once you start paying the labour class less, you would get used to that and not increase a labourer's wage back to old levels that easily and that soon. So scores of labourers will now take years to start earning back what they were earning pre 8 November 2016, the day the demonetization move was announced.
Modi has not only got to prove this fear wrong but also give back more.
This above scheme should continue till the time, as a nation, we are able to remove the problem of wide scale unemployment.
To remove unemployment, he has to then outline a scheme for about 25 million new employment generation in urban India and 150 million in rural India. Unlike the lip service around Swachh Bharat, this should be a concrete plan to be achieved by 2029. Focus on employment generation schemes.
For this, I suggest that Modi should increase the allocation for rural Indians, mainly farmers, by a straightforward Rs.100,000 crore a year. The obvious question is, why? Well, everything has to be in some context. And the context here is that rural India needs 150 million jobs to be created. As a committed government, our aim should be to do this in a span of 5 years and not 65 years. Thus, we have to create 30 million jobs a year. In rural India, a job can still be created by investing about Rs.33,750 per job. This would justify the necessity for an additional Rs I,00,000 crore per year. Half of the money would be invested every year towards improving physical infrastructure in rural India including effective irrigation facilities, better and functional roads, a vast network of cold storages and regular supply of electricity. The other half would be every year invested towards improving social infrastructure in rural India including providing much better access to education, health and sanitation. The first would lead to a dramatic improvement in productivity in rural India and result into vastly superior income levels for farmers. The second would lead to a dramatic improvement in human development indicators in rural India. And both will create jobs, removing the massive rural unemployment from India.
I would also suggest another Rs.120,000 crores be allocated for 25 million jobs to be created for the urban unemployed. In urban India, the cost of creating a job dramatically multiplies to about Rs.240,000 per head. Thus, to create 5 million jobs per year, we would require the amount I mention above. The urban poor also need another thing apart from employment.
5. Modi should tell Indians that they have the right to live with dignity and equality through equal education opportunity for all. Modi should straightaway make Rs 100,000 crore allocations for schemes like Sarva Shiksha Abhiyaan & Mid Day Meal Schemes etc.
While the MGNREGS will help a landless labourer escape starvation, the Sarva Shiksha Abhiyaan along with the Mid Day Meal Scheme will help his children acquire the education and the skills that can enable them to decisively leave poverty behind in just one generation. In fact, if the twin schemes are implemented effectively for just ten years, the government can then actually afford to drastically reduce allocations for the schemes, for they would become redundant in many cases. But for this to be effective, there should be an incentive scheme for school teachers and principals. About Rs 10,000 crore should be earmarked as cash rewards for teachers and principals whose students do well in board examinations. But these cash awards must be disbursed every five years only after board results are announced. The prospect of a few lakhs of rupees as cash incentives might prompt many absentee teachers and principals to pay more attention to the educational and nutritional requirements of their students! Modi should set aside Rs 5,000 crore out of this Rs 100,000 crore for the creation and maintenance of a national database of school children as well as their progress through successive classes.
Modi should additionally make a ten-fold increase in allocation of post-matric scholarships.
About Rs 1,700 crores are allocated now for post-matric scholarships to poor students belonging to SC, ST and general categories. This should be increased by ten times to about Rs 20,000 crore. The logic is very simple again: the Sarva Shiksha Abhiyaan will create a generation of poor students who do not have the money to pay for their higher and professional education. This corpus will ensure that no student – no matter of what caste or religion – is deprived of higher education for lack of resources.
6. Modi must tell Indians that they have the right to live a healthy life.
For this, Modi should announce Rs 60,000 crore for the National Rural Health Mission. Smart incentive-based schemes can see to it that this is a success. Around Rs 5,000 crores should be set aside for doctors and support staff who run primary health care centers and who can provide proof that they have actually spent the whole of one year in the village or rural area assigned to them. Once poor families don’t starve because of MNNREGA and their children get education and skills thanks to the Sarva Shiksha Abhiyaan, even minimum basic attention to their health and sanitation needs will create a virtuous cycle that will trigger the much vaunted about demographic dividend.
7. Lastly, Modi must give people the right to live with dignity of cleanliness. Swachh Bharat is not about taking a broom and cleaning streets one day for a photo opportunity. It is about giving people clean housing to live in. For this, he has to start a massive urban slum removal program. Indians need dignity of existence so that another Slumdog Millionaire is not made on India by Western imperialists. For that, we need to budget another additional Rs 25,000 crore per year for five years to create 15 million urban flats of minimum 250 sq. feet each.
If Modi does these seven things, through the upcoming budget that is to be declared soon, he would make people forget the demonetization fiasco and turn it on its head and showcase it as a success. It will make him the biggest real Robin Hood the world has ever seen... A Messiah of the poor who would be known for his attempt to take the money from the rich and distribute it to the poor in a sensible way to change the future of the world, for, as I keep saying, changing India is changing the world.
Will we now see the emergence of Narendra 'Robin Hood' Modi? If we do, 2019 is assured. 2029 is what we should be looking at.