Forget Demonetisation, here are short-term remedies to root out black economy in India

In his latest book, Arun Kumar writes that political will and determination to act will go a long way in curbing the black economy.
Forget Demonetisation, here are short-term remedies to root out black economy in India
Forget Demonetisation, here are short-term remedies to root out black economy in India
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By Arun Kumar

One needs to think of the remedies in the long, medium and short term. In the long run, one will have to go for structural changes relating to the economy and society as a whole. The executive will need to be overhauled, the regulation of corporates and business in general will need to be redone, and political reforms will have to be carried out. In the medium term, given the structural changes, there has to be the targeting of changes in sectoral policies, especially in areas like real estate, and imaginative and simplified tax policies. Short-term changes will require implementation of policies that are already in place. Unquestionably, the inadequacies of existing structures and manipulation of monitoring and regulatory infrastructures will make them of limited use. But there is an immediate requirement for laws that can eliminate hawala and banking secrecy as well as rigorous implementation of schemes like the Lokpal and the strengthening of the Right to Information (RTI) Act.

Some policies and ideas that could be implemented are given below:


Right to Information

The black economy functions in secrecy. Hence the most important tool that we have, to bring it out into the open is the RTI provision. It is required to bring about transparency and accountability at all levels of societal functioning. It is crucial to bring under RTI all political parties, the judiciary, the prime minister and chief minister’s offices. If it is extended to them, it would make the politician and the executive accountable and their functioning transparent so that, unlike at present, they cannot subvert the law deliberately. A bill was passed in 2005 but the present dispensation on Right to Information is proving to be inadequate since a) ways to circumvent it are being found, like flatly denying that information is available, b) important offices (like the prime minister or the judiciary) have been left out of its ambit, c) the whistleblowers who reveal information are being threatened and/or killed, and d) it is far too complex for the common man to use.

The mindset of the politicians and the bureaucracy needs to change for RTI to become effective. That is possible only if information is automatically made available to the public rather than only when demanded.

Action Needed on Available Information and Existing Laws

The government collects a vast amount of information on all kinds of activities of the members of the triad (corrupt politicians, businessmen and the executive) but it is usually kept secret and not acted upon. At times this information is used to politically blackmail or take political advantage. That is why the Opposition cries foul when the government acts against the corrupt. The general public also becomes sceptical of such action.

For instance, information is collected on hawala operators and banking operations but it is not acted on. Recent cases highlighting the misuse of banking secrecy laws have come to light; this has to be stopped.

A Lokpal Bill was passed but a Lokpal is yet to be appointed. It is needed to make the executive and the political class accountable. But it must only be implemented for the top echelons. It cannot be for the entire bureaucracy since that would require the creation of another bureaucracy which can also get corrupted.

Who will prevent the Lokpal from getting corrupted? The Philippines has functioned with an ombudsman who is unable to check corruption in high places. If Justice Ramaswamy could be in the dock and the Chief Justice of the Punjab High Court had to take steps against other judges, what is the chance that the highest levels of the judiciary and the executive will not be corrupted or silenced? After initial euphoria, what has the Central Vigilance Commission (CVC) achieved? In other words, mere formalism will not work.

Often, at present, penalties on illegal activities are not enforced. There needs to be stricter implementation of these so as to create deterrence. Currently, at the initial stage of investigation, many cases against the powerful are deliberately mismanaged with the result that they go scot-free in the courts. This will change only if the investigative agencies are made accountable and autonomous of political interference, as discussed below. Only if this is done can we create an environment of real deterrence. For instance, corrupt businessmen can be blacklisted by banks and loans denied to them; they should also be speedily prosecuted by the courts.

Autonomy to Institutions

In India, there is no dearth of regulatory authorities but we need to understand why they do not deliver. It is as a result of political interference and this needs to be remedied by giving them greater autonomy but also demanding accountability from them. The selection of the head of the regulatory authorities and the watchdog agencies—CVC, Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Intelligence Bureau (IB), Research and Analysis Wing (RAW), etc.—Public Sector undertakings (PSUs) and banks should be made independent of political bosses and specific ministries. Their accountability should be to Parliament and its committees, as in the case of CAG.

Excerpted with the permission of Aleph Book Company from the book Understanding the Black Economy and Black Money in India by Arun Kumar

You can buy the book here

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