‘Modi’s demonetisation a gigantic calamity; whole nation in turmoil’

Kerala Finance Minister Thomas Isaac on Saturday described the Centre’s decision to demonetise old Rs 500 and 1,000 notes a “national calamity” which has put the nation in a turmoil. -

The crisis following the cash deficit has percolated to even the organised sector and will result national production loss of Rs 2.5 lakh crore, he said while addressing reporters here on Saturday. This has led to people thronging banks and ATMs to withdraw their money. The Reserve Bank has set cash withdrawal cap at Rs 24,000 a week.

“There is going to be a severe downturn. Even if you take 2 per cent (decline in GDP as suggested by former prime minister Manmohan Singh)... it means something like loss of production of Rs 2.5 lakh crore...,” Isaac said, adding that the Centre’s move is now impacting almost all sectors of the economy. 

He dubbed it as a failed exercise, saying Prime Minister Narendra Modi is shifting the goalpost to cashless economy. “The whole nation has been put into turmoil. Modi’s demonetisation has become national calamity,” he said.

He countered Finance Minister Arun Jaitley’s claims of about Rs 3 lakh crore expected gains from the exercise, reeling off data that he said suggest about Rs 11.5 lakh crore of the invalid currency have already returned to the banking system. 

“Even if you give a very generous estimate of Rs 1 lakh crore (of gains)... you have sacrificed Rs 2.5 lakh crore of national product for unearthing Rs 1 lakh crore of black money. This is an enterprise that has totally failed,” he said.

Referring to the 2002 Gujarat riots, Isaac said “He (Modi) looked unruffled, took it in his stride and 

for various reasons, he was able to take people of Gujarat along with him. I think he wants to do another similar exercise (about demonetisation) at all-India level”.

“What the Prime Minister should understand that things are getting out of hand. There is limit to people’s patience. How long can they stand in the queue... Let us come to senses. Have a discussion in Parliament accept something terrible has happened,” the Kerala minister said.

Power Minister Piyush Goyal on Saturday described the decision to demonetise currency notes “100 per cent success” and said money which was not kept in bank accounts has come into formal economy and now is traceable. “We have never imagined that (black) money will not be deposited in banks. We have given 50 days time to deposit (old currency notes of Rs 500/1000) money,” Goyal told reporters.

On the estimates that about Rs 4-5 lakh crore (of blackmoney) will not be deposited into banks, he said, “I think this would be your estimates. Government has never made such statement that will not come.”  He further said, “Our countrymen are honest. It is possible that some tax has not been deposited which will be deposited. We have got 100 per cent success after this historic decision (demonetisation).” 

Elaborating further he said,”The money which was not kept in bank accounts has come into formal economy and now it is traceable. It will reflect in GDP. People will earn interest income on these deposits.”  On misuse of Jan Dhan Accounts, he said, “Please don’t accuse all honourable people who have opened Jan Dhan accounts. It is possible that some people have done wrong. We will take action against those people.” 

Goyal also said that government is working on encouraging use of point-of-sale (PoS) machines by reducing its rental to Rs 100-150 per month which, is presently Rs 500-700. The cost of these machines ranges between Rs 4,000-8000 per unit. At present there are about 14 lakh PoS in the country provided by different banks. Traders’ association want to increase the number of these machines to two crore.

The minister also said that state-run Energy Efficiency Service Ltd (EESL) has already floated a tender to procure 10 lakh PoS machines and would try to reduce to price on the lines of LED bulbs. EESL has reduced the procurement price of 9 watt LED bulbs from Rs 310 per unit to Rs 38 recently. These lights are provides to consumer through discoms and other channels at a retail price of Rs 65 per unit.

Minister also talked about incentivising digital transactions in the country to move toward less cash 

society. Finance Minister Arun Jaitley on Saturday said that one cannot convert black money into white by merely depositing unaccounted cash in bank accounts as taxes are required to be paid on them.

“By just depositing it (unaccounted money), you don’t avoid the responsibility of paying tax,” he said when asked about surge in deposits in banks following withdrawal of high denomination currency notes. He further said the income tax department is keeping an eye on such deposits.