Note Ban: Karyashala Kool-Aid In the Midst of Raid Raj

After the failure of demonetisation, the government is moving the goalposts by conducting several I-T raids.

After the carpet bombing called demonetisation almost failed, the government has now shifted the goalposts and has launched a carpet bombing of cashless karyashalas (workshops) in order to push the country to become digitally savvy overnight.

It doesn't matter whether the digital infrastructure is in place or not. Connectivity may be poor and banks are not up to the task. So what? It has to happen because it has to happen.

But that's not the only admission of failure. Two more actions suggest that the government is retreating, despite bravado. One big action is actually a surgical strike, of an old kind – I-T raids.

Also Read: The I-T Department’s 9 Biggest Cash Raids Since Demonetisation

The Art of Selling Kool-Aid

• Two actions suggest that the government is retreating despite bravado.
  
• One big action is a surgical strike of an old kind – I-T raids.
  
• Raids have been widely reported, but not what happens thereafter.
  
• Second, authorities will approach large depositors and coerce them to come under the new Income Disposal Scheme.
  
• The government must be in a position on 30/31 December to brag that at least Rs 3 lakh crore of black money has already been identified.
  
• We will soon be fed with a big number running into the thousands of crores of black cash the authorities have unearthed.
  

The Spectacle Called I-T Raids

Now this spectacle is playing out across the country; from Surat to Kolkata, from Chennai to Chandigarh.

The Income Tax department, the Enforcement Directorate and state police are raiding shops, homes, offices, moving cars and postal vans to seize cash and gold.

This cash is in both old and new notes, making a mockery of the claim that the note ban will kill black money. The amount of seized new notes is not a joke. It only shows that cash criminals have been a hundred steps ahead of the tax authorities and state machinery, making this “historic war” look silly.

The new Raid Raj has many objectives.

The action in Chennai gets you the man close to the new power structure of AIADMK! So politically, better they behave and be on the right side of central government or else..

Then there are some BJP folks caught with cash, perhaps to give the impression of fairness. Raids are widely reported, but not what happens thereafter.

Also Read: PM Modi’s Note Ban ‘Yagna’ Burns the Poor And Spares the Corrupt

Way to Camouflage Note Ban Failure?

One telling example: We read in newspapers that Rs 90 lakh was seized from a car belonging to Maharashtra Minister Subhash Deshmukh soon after demonetisation was announced. Impressive!

But what we have not read is the fact that the gentleman has been able to explain the source of his cash to the authorities, and has gotten it back. Chapter closed!

So what should we make of the current spectacle of raids? All such cases take a long time to reach a conclusion.

However, we will soon be fed with a big number running into the thousands of crores of black cash the authorities have unearthed. In fact, the government is racing against time to get to that “impressive” number.

The latest raids (in I-T parlance, ‘surveys and searches’) are also aimed at discouraging people from depositing old notes in banks because almost the entire amount of money (Rs 15.5 lakh crore or Rs 14.65 lakh crore, whichever set of data you are working with) appears to be coming back. The latest number we have from RBI is of nearly Rs 12 lakh crore already in.

Also Read: Dear Modi Ji, How Are Ministers Able to Afford Big Fat Weddings?

Troubling the Majority to Attack the Minority

Before this renewed vigour in launching raids, the announcement of another Income Disclosure Scheme (nicknamed IDS-2) was in fact a much bigger camouflage.

It may be recalled that in the first scheme, Rs 65 thousand crore was declared and most of it actually not so voluntarily. That was the result of survey tactics and pressure on alleged tax evaders.

Now that the entire cash amount – black or white – is expected to come back, how will the government declare a historic victory?

So the authorities will approach large depositors and coerce them to come under IDS to part with 75 percent of their money to the government coffers. Using whatever tactics – raids, IDS-2, quick examination of deposited cash – the government must be in a position on 30/31 December to brag that at least Rs 3 lakh crore of black money has already been identified.

What emerges out of this chaos is worrisome – you attack 6 percent (that is the percentage of black cash in overall black economy) of the black money/black wealth problem. Your best case scenario is now a claim of catching 20 percent black cash.

So your success rate is ONE percent! And at what cost – in terms of pain and disruption to the economy? The cost is very high, but let's leave that number crunching for some other time. Till then, enjoy the art of selling Kool-Aid!