Whoever planted the idea of demonetization didn't know elementary economics: Chidambaram

Terming demonetization a "monumental tragedy" and an "anti-poor" measure, former Finance Minister P Chidambaram today said whoever planted the idea should enrol in an undergraduate course in economics.

"I don't think demonetization is a reform. It is a monumental tragedy which is anti-poor and has put millions in misery and hardships," he said at an event at the Mumbai University. By demonetization, the Modi government created a myth that all cash is black money and all black money is cash, he said. Stating that the government did not know, either before November 8 or afterwards, the estimate of the black money in the system, Chidambaram said it is akin to a surgeon carrying out an operation without doing homework.

"It is like a surgeon operating upon a patient without knowing whether the patient has any disease at all, which part of the patient is affected and what kind of surgery is required," the former minister said.
Asserting that all cash is not black money, the senior Congress leader said black money is the income that has evaded tax, and there are large sections of the people who have cash but who do not evade income tax.
Agricultural income is not subject to taxation, income of charities is exempted, as is the income of religious trusts.

Also, the people of Northeastern states do not have to pay income tax and they have cash in hand, he said. "Is that all black money? Is the money in the hands of farmer black money?" he asked. "I think whoever planted the idea of demonetization did not know elementary economics. He should be asked to enrol in an undergraduate school of economics," Chidambaram quipped. If a farmer has some cash in hand, it is not black money, but when he pays, say, Rs 1,000 as fees to a doctor or a lawyer and does not get a receipt, then this Rs 1,000 becomes black money, Chidambaram said.

But if the doctor or lawyer goes to a restaurant and buys a meal and the restaurateur gives him a bill for Rs 1,000, then the same Rs 1,000 note again turns 'white', he said. "People who did not understand the elementary economics have authored demonetization," he said, adding that all the Rs 15.44 trillion of banned notes will come bank to banks by December 30. Demonetization was the worst thing that could have happened to the economy as it crippled the farmers, self-employed, small businessmen and daily wage earners. "It is an unmitigated tragedy...certainly has nothing to do with economic reform," he said. Demonetization is generally resorted to only in two circumstances, Chidambaram said. "One, when there is hyper inflation...you demonetize your currency because it is worthless. Secondly, when there is currency instability and to bring about stability, you demonetize," he said.

"We are in the distinguished company of Zimbabwe, North Korea, Libya and now Venezuela (which demonetized currency). Do you want India to be in the company of these countries?" he asked. As long as there is demand for black money, it will be generated, he said. "demonetization is no answer for black money. The answer is to stamp out corruption, stamp out the sources which generate black money," Chidambaram said. The sectors which demand black money are construction, jewellery, licensing and permission granting, he added.