Tremendous hardship undergone by the common man will go unrewarded if the government slows down fight against black money after demonetization. A close look on recent developments shows that the move to withdraw higher denominations was not the first action against black money in recent times.
Before this, there were the Undisclosed Foreign Income and Assets Act (against black money in other countries), the income disclosure scheme (against domestic black money), restructuring of Double Taxation Avoidance Agreements, regulation of Participatory Notes etc. Demonetization came as the last one and inviting involvement of the masses who never had any association with black money.
Of course, the primary benefit of demonetization is removal of counterfeit notes though trapping black income stashed in cash can be realized.
At the same time, nobody can deny the political risk of the action as people must suffer for several days; postponing their transactions. But the government was firm.
The announcement was made by the Prime Minister himself and bot by an office bearer like the RBI governor, to impart the right amount of seriousness.
The scheme became a clear warning to the black money holders who collectively surrendered only Rs 70000 crore approximately under the two previous black income revealing windows. This is despite the fact that the estimated that black money is around 40 to 50% of India’s GDP.
Now, with the sudden decision of demonetization, everybody is convinced that government is ready to cross every barrier to stop black money. Next action is well awaited.
Here, government has a beautiful option. It can make card based/bank payments mandatory for high value transactions especially for real estate and jewellery sectors. Card use reveals PAN identity and is maximum disclosure. In the next step, cashless transaction may come as a mandatory clause and this will make India to achieve a big victory against the black money.