P Chidambaram terms DeMo as 'biggest scam'

Former finance minister and senior Congress leader P Chidambaram alleged that the purpose of Narendra Modi government's demonetization move was to convert black money into white money and termed the move as one of the 'biggest scams' in India.

Speaking at an interactive session on demonetization and GST organised by the Mumbai Pradesh Youth Congress on Saturday, Chidambaram said the two decisions had caused hardships to small and medium business who make up a bulk of the economy, as well as the common man. This had also led the GDP growth, which was 9.1 per cent 18 months ago, to slump to 5.7 per cent in the April-June quarter, with each percentage point fall translating into a Rs 1.5 lakh crore loss for the economy.

"What a catastrophe, what a tragedy. This was the biggest man-made tragedy that hit India," he said, adding that this was worse than tsunami or Mumbai floods. "Unparalleled misery was heaped on the country," he charged.
Chidambaram noted that while the RBI Act said it would propose measures like demonetization, "This is a case where the government proposes and the RBI is asked to give an opinion."

"The Reserve Bank, which is one of the most respected institutions in the country did not cover itself with glory," he rued, adding that over a hundred people had died in bank queues and those in informal sector professions like carpenters, electricians and barbers were badly affected.

Explaining how the line between black and white money was fluid, Chidambaram noted that none of the stated objectives of demonetization like curbing black money, terrorism and counterfeit currency had been succeeded.

Though the government claimed that the move would also give a push to cashless, digital transactions, this was difficult considering the bottlenecks in infrastructure like electricity supply and tele-density. Developed countries like Germany (60% cashless transactions), Australia (50%), UK and Canada (40%) also had most of their transactions taking place in cash.

"demonetization is a major blow... This government does not have the honesty to admit this," said Chidambaram, adding that small and medium enterprises were wiped out and micro business were dead.

"Today, every business has been affected by GST... They have given GST a bad name," said Chidambaram, adding that high and multiple rates of taxation were affecting both, business and consumers, along with provisions like making businesses file three returns a month and confusion over the tax to be applied to a particular good. "There will be a future government in this country which will correct these mistakes," said the Rajya Sabha MP from Maharashtra, adding that it was for the people to decide when this regime would be put in place.

The formal sector had lost 15 lakh jobs with I.T majors and leading banks too choosing to sack employees and investments too had been affected. Chidambaram warned that "jobless growth is a ticking time bomb."

He pointed out that it was a fallacy to say that high rates of taxation meant higher tax revenues as it would also lead to evasion.

Chidambaram credited the Congress for decision to liberalise and open up the economy in 1991. From 2004 to 2009, the country had seen an average growth of 8.5%, despite a dip due to the international financial crisis (2008) and Eurozone crisis (2009). The economy had grown by a healthy 7.5% in 2014-15 before Modi decided to demonetise 86% of India's legal tender.