Years after he batted for the idea of doing away with the now-demonetised high-denomination notes, R. Vaidyanathan, professor of Finance and Control at the Indian Institute of Management Bangalore, says there is more to be done.
In an interview with The Hindu , Prof. Vaidyanathan, who was part of the task force set up by senior BJP leader L.K. Advani, said the success of the Centre’s move could be gauged from how many of these notes actually return to the banks.
Excerpts from the interview:
You were among the first to suggest abolishing high- denomination currency notes back in 2012.
As on March 31, 2016, 17 lakh crore was the total circulation of money, of which, 14 lakh crore was in denominations of Rs. 500 and Rs. 1,000. We should wait and see how much of this 14 lakh crore is surrendered to the bank. This will prove its success.
But real estate, land and gold are not covered by demonetisation. Approximately five per cent of the country’s annual GDP is black money.
You had advocated the scrapping of Rs. 500 and Rs. 1,000 notes. Though the government has done precisely that, do you think the introduction of Rs. 2,000 notes — which is in fact higher than the highest denomination note that we had — will defeat both the purpose and the logic in scrapping high-denomination notes?
There have been a lot of questions about the Rs. 2,000 notes. But the government has introduced extra characteristics in the new notes that are not there in the Rs. 1,000 notes. No government will come out and say what are the exact features of the new notes.
Work has been going on for months and a lot of thought has gone into this. I would not compare the old notes with the new ones.
You had also called for a threshold limit for cash holdings to prevent hoarding of money. Will the measure to demonetise the said notes then be successful in curbing ‘black money’ as a standalone step?
Currently, hoarding cash is not a crime in India. The I-T or ED teams have to prove during raids that the cash found is more than that from known sources of income. There should be a threshold on the amount of cash that an individual can have. Preventing hoarding of cash itself will curb black money and I am sure the government will be looking at it.
You are also said to be working on book on black money and tax havens.
The book Black Money & Tax Havens and India’s Wealth Abroad will be out in January 2017.
It explains the steps that can be taken to curb black money stashed away in foreign countries. One of the suggestions I have made is for the government to pass an Ordinance that money found in any foreign country which is not within the RBI’s framework should belong to the government. Money meant for trade or commerce with RBI permission is OK. Assets such as gems, jewellery and property abroad could be worth anything between USD 500 billion and 1.5 trillion.