Demonetization: Modi or Manmohan Singh: Who is Credible?

By: R. Veera Raghavan, Advocate, Chennai

Did you read  Manmohan Singh’s  newspaper article  on the recent demonetization of 500 and 1,000 rupee notes?  If not, please flip through The Hindu of 9th Dec. and have a look or view it at

The government’s initiative is important, and so is the writer who was India’s prime minister for ten years before Narendra Modi assumed that post.

Manmohan Singh quotes Modi on the primary reasons for demonetisation, viz., one was to check “enemies from across the border …. using fake currency notes” and the other was “to break the grip of corruption and black money”.   He agrees saying, “Both these intentions are honourable and deserve to be supported whole-heartedly” and adds, “Counterfeit currency and black money are as grave a threat to India as terrorism and social division. They deserve to be extinguished using all the firepower at our disposal”.  So far so good.

The former prime minister faults Modi on an assumed underlying premise behind demonetisation, viz., Modi’s “false notion”, as he put it, that “all cash is black money and all black money is in cash”.  Anyone who is 18 would not believe that all cash is black money.  Did Manmohan Singh really think that Modi held a false notion that “all cash is black money”?  No, the former governor of Reserve Bank of India could not have honestly believed what he wrote.  If one imagines that “all cash” is black money, it means he thinks Reserve Bank of India routinely prints and issues black money!

Manmohan Singh could not also have believed, as he wrote, that Modi held a “false notion” that “all black money is in cash”.   Anyone who is a little older than 18 will not have that notion, and Manmohan Singh cannot be naive to think that Modi hoped all black money to be in cash.  Not just Modi, his peon and cook too should know that blackmoneywallahs gain nothing by keeping their entire illegal cash incomes in not-to-be-used bundles of paper currency.  They would enjoy enough of that income by buying gold, land, buildings or other assets and by splurging.  Some have also been caught keeping their black money in bank fixed deposits.  So Manmohan Singh was wrong in imputing these false notions to Modi.  But more than that, the former prime minister has damned himself severely.  Here is how.

Manmohan Singh writes  further: “Black money is a menace to our society that we need to eliminate. …… This is wealth that has been accumulated over years by those with unaccounted sources of income.  Unlike the poor, holders of black money have access to various forms of wealth such as land, gold, foreign exchange, etc. There have been various attempts by many governments in the past decades to recover this illicit wealth through actions by the Income Tax department, Enforcement Directorate and schemes such as Voluntary Disclosure.”  And he adds: “Evidence from these past attempts has shown that a large majority of this unaccounted wealth is not stored in the form of cash”.   What an unconscious confession!

Without saying it, but clearly implying it, Manmohan Singh admits that it is mostly during past Congress or Congress-led regimes at the Centre that black money in India was “accumulated over years”.   He admits too, indirectly, that attempts by those governments to unearth black money in the country and book offenders yielded no good results. What follows? When his party ruled the central government, people could freely generate and acquire black money, coolly convert it into other forms of assets and merrily keep that wealth, and they would not be traced and booked at any of those stages.  This showcases the sheer inefficiency, unwillingness, and possibly more, of the ruling governments of those times in battling black money.

We know that the 2G spectrum scandal at the central ministerial level, storming around minister A. Raja, heaping a huge revenue loss on the government and involving massive kickbacks – God knows how much it was, and how much of it was black money – was enacted when Manmohan Singh was prime minister.  We know too that his minister for communications and IT, Kapil Sibal, certified that the scam caused “zero loss” for the government.  Time magazine knew more.  In 2011 it gave that scandal its pride of place in its all-time list of “Top 10 Abuses of Power”, and put it second in the list behind the Watergate scandal.

Manmohan Singh implies this too, though he feels shy of saying it explicitly.  He would like us to believe that it is impossible to curtail the never-ending generation and growth of black money in the country, that no action such as demonetisation can be effective against that menace and that all any government can do is lament it like what he does.  He takes that stance by implication, so he can portray all the past Congress or Congress-led coalition governments at the Centre as doing their best to contain black money – and hope that no one may accuse those governments of inaction.  A futile hope.

Many advanced nations do not  permit  black money to be continuously generated and spread in their economies, like India does.   Those countries do not witness so much of free-wheeling corruption.  Their top government officers who have to watch over and report or act against corruption are themselves not corrupt, and that checks corruption down the line. More important, ministers who run governments in those countries are largely clean and so they inspire officers on integrity at work.  A few exceptions can always be tackled.

If a ministry is not perceived  to be clean in its dealings with businesses, many government officers will take the cue and benefit themselves financially in illegal ways.  That ministry will have no mind or energy to take serious and imaginative actions against governmental corruption and its byproducts like black money.  Officers of such a government cannot also check or go after black money.  Modi has given the impression that he is honest and determined, and so long as that impression stays many government officers would feel inspired to implement his drive against black money.  Reports coming in every day since demonetisation that unaccounted old currency notes, new currency notes, gold and other assets worth in crores are being seized from every nook and corner of the country are a testimony to Modi’s moral leadership in India’s fight against black money.

After 2014 elections, the prime minister and his ministers changed, while officers of the central government remained. How come the same officers now uncover hidden black money and suspicious wealth in large chunks through their raids and inspections across the country, while they did just a little of that under decades of previous governments, mostly Congress-propped or Congress-led?  The reason is, they derived no inspiration from those governments to go on a mission mode and act boldly and honestly in searches and seizures.

Economists and other experts have expressed varying degrees of approval or disapproval on Modi’s demonetisation and allied measures for their worth in producing results.  So, for the layman theses conflicting opinions cancel out themselves and he has to go by what he sees around and senses. India’s common people seem to see the difference between years of previous central regimes and Modi’s government now scrapping high value notes and acting against black money.  That is why, while queuing up before banks and ATM’s to withdraw small amounts of cash in a regulated post-demonetisation period, and putting up with other hardships, they have backed the party headed by Modi hugely in civic polls in three States and in Chandigarh, all held after demonetisation was announced.   This is also an answer to a good part of other comments of Manmohan Singh in his article.

Sure, swift legal action against the corrupt and the blackmoneywallahs is a warning to them, and others wanting to emulate them.  It will hold them in perennial fear that they could be caught anytime, shamed and brought to justice, and will keep most of them largely contained. That is how it works in advanced countries, and not because angels live there. So the present demonetisation and its follow-up actions will have a good preventive effect on corruption and black-money holding, and that is a huge national benefit.  That will last as long as we have a central government that shows a clean image and acts tough on corruption and black money.  Manmohan Singh has not also acknowledged this national benefit.

Wikipedia  introduces  Manmohan Singh as  an “Indian economist and politician”.   Viewing him as an “economist-turned ordinary politician” would be closer to reality.  Manmohan Singh will know it.

(More articles of R. Raghavan, Advocate, Chennai may be read at the following site)


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