He is credited with pitching to Prime Minister Narendra Modi an idea that would lead to the government’s decision to revoke the legal tender status of old Rs 500 and Rs 1,000 notes from the midnight of November 8, 2016, rendering worthless as much as 86 per cent of currency in circulation at the time. A year and much economic disruption later, Anil Bokil
tells Anulekha Ray in an interview that calling the exercise ‘demonetisation’ would not be entirely correct. Since it pertained only to currency or cash. ‘note ban’ would be a better expression
, he explains. Edited excerpts:
One year after the demonetisation announcement, do you think the move was necessary?
If we consider a daily per-capita disposable income of Rs 50 as a benchmark for poverty, 30% of our population lives below the poverty line. For a large part of the population, Rs 100 notes should be more than enough. But on the day of the announcement, high-value currency notes of Rs 500 and Rs 1,000 accounted for 86% of the total currency in circulation. These high-denomination notes were mainly used for corruption and anti-social activities, which affect everyone — from farmers to businessmen. Without such a move, it would have been impossible for a democratic governing system to control this parallel economy. So, yes, the note-ban drive was absolutely necessary.
In that case, what was the need for an even higher currency denomination of Rs 2,000?
The Rs 2,000 notes were introduced only as a stop-gap arrangement. In a recent RTI query answered by Security Printing and Minting Corporation of India, it is clear that only Rs 500 (new) and other notes of lower denomination (but not Rs 5 and Rs 2) are being printed. There is no real need for this high-denomination note. In my opinion, even Rs 500 notes can be easily withdrawn.
What about the implementation of the demonetisation move? Many have said that a ‘slow demonetisation’ method would have worked better than the disruptive one adopted by the Modi government.
In the beginning, common people had to face a lot of difficulties. But they understood that the drive was essential for cleaning the system, so and they cooperated, patiently. The entire exercise was a courageous one on the government’s part. However, ArthaKranti Pratishthan (the Pune-based group with which Bokil is associated) had recommended a different way for implementing the move.
We suggested that the government withdraw Rs 500 and Rs 1,000 notes in a phased manner. We also proposed the withdrawal of several taxes along with the introduction of the bank transaction tax.
According to the RBI annual report, 99 per cent of the scrapped notes have been returned to banks. How then did demonetisation help address the black money issue?
The demonetised notes could either come back to banks or become invalid after the deadline. Also, the fake currency
notes either came to light or became invalid. The hoarded cash came back to banks and the source of black money
was revealed. It will help the government form a better taxation system. In that sense, it does help in addressing black money, but only partly.
Do you see a ‘cashless’ or digital economy as possible in India, given that internet penetration remains very low in the country, especially in rural parts?
ArthaKranti never recommended a ‘cashless’ economy. Our motto is ‘taxless, less cash’ economy. Considering India’s mobile penetration, M-Money (mobile wallet money) would be a great enabler. A large part of the population below or around poverty line which has a low share of transactions in volume terms could continue to deal in cash, with low-denomination notes. The rest of the country could use banking channels.
What is your suggestions for India’s taxation system?
The existing taxation system should be replaced by the bank transaction tax. A taxation system where the governments gets its share of revenue, taxpayers gets credit as they enter the banking system, and banks get a share of each transaction. It will help banks get rid of costly primary deposits.
Everything invested in getting compliance in place is purely a cost addition. So, the taxation system should be based on exchange, not compliance.