Demonetisation Rs 500 and Rs 1,000 notes. Will it curb black money? Part 2

“It is true that the immediate impact (4 to 5 months) of demonetisation is surely negative in the form of slowdown of consumer spending, severely affecting the highly cash oriented industries like real estate, jewelries, textile etc along with a crawling GDP growth. But this is a 5-6 months transition period. After which a massive amount of capital will be transferred into d banking system and Indian economy will boom.”

-This is what my friend Kalpita Mahajan told me just couple of days back. She had also send me a video of Amit Rathi, where Rathi talks about the same. You  can watch that video here.

Kalpita is a member of Rationalists’ and Humanists’ Forum of India and is a rational person to the core. She accepts facts only after meticulous research. Despite when someone like Kalpita can get confused that demonetisation will boost Indian economy, many people would have same kind of believe. So it is essential to analyse the claims.

Who is Amit Rathi?

Amit Rathi is the Managing Director of Anand Rathi Financial Services. According to his Linkdin profile,

Anand Rathi is a leading Indian player in private wealth management, investment banking, brokerage and capital markets lending with 150 offices across the country with presence in the UAE, US and UK through affiliates and a team strength of over 2,500 professionals.

The Anand Rathi PWM business is a market leading advisory service serving the wealth management needs of HNI families across its offices in Mumbai, Bangalore, Delhi, Hyderabad, Chennai and Pune.

Amit Rathi is also infamous in connection with the Rs 5,600-crore scam at National Spot Exchange Ltd.  One can know more by visiting the links given below.

NSEL: Anand Rathi Raided, Money Laundering, Auditors Flee

NSEL scam: Court extends Amit Rathi’s police custody till March 13

Lets us not deviate our discussion to whether he has professional motives to make such claims. Rather we will stick our discussion to analyse the claim that ‘it would boom Indian economy’.

Demonetisation: Will it boost Indian economy?

People who say that this will boost the economy believes that a massive amount of capital will b transferred into the banking system in the following way:
1)the taxes on the unaccounted money along with the penalties.
2)worthless currency notes expiring on 31st mar 2017 (which people decided to keep as it is neither declared nor utilised other way) as a written off liability for the RBI.

The unearthed money supply will boost up the economy.
1)inflation will start to fall because of increase of d legitimate huge money supply .
2)huge taxes will b deposited on an yearly basis.
3) interest rate will drop because of favourable monetary demand supply equation.
4)companies can expect a higher profit because of a lower interest rates.
5)a overall economic boost up will follow.

The above points are based on the concept that “black money” consists of hoards of cash which are kept hidden inside the wall or pillowcases or buried under the earth. As 500 and 1000 rupee notes are demonetized, then people with black money going to banks to exchange large amounts of old notes for the new legal tender would make the banks suspicious; and banks in turn would convey their suspicions to the tax authorities who would then catch the culprits. “Black money” would thus get exposed.

This argument, that ‘the demonetization of 500 and 1000 rupee notes is an attack on black money and will boost Indian economy in near future’, is based on an utter lack of understanding of “black money” and “parallel economy system.”

It is based on wrong assumption that “black money” actually consists of hard cash, where as in reality as stated by ED and RBI, only 6% of total black money economy is in hard cash. Now if a person possesses, say, unaccounted money of Rs.20 crores, and that too in 500 and 1000 rupee notes, then such a person instead of going to the bank with the entire Rs.20 crores, will send several people to the bank, each carrying a small amount, and would do so over a number of days prior to the December 30 deadline.

In fact even this long process would be unnecessary. All sorts of intermediaries would come up fairly soon who would do this job of exchanging old notes for new ones on behalf of customers for a consideration.

Read here: Currency Exchangers Make A Killing, Buying Old 500 Rupee Notes And Paying Only Rs 300 In Return

Understanding black money and parallel economy system

It is the money generated from completely illegal activities such as arms smuggling or drug paddling. Alternatively, money activities which are legal but nonetheless undeclared because they want to avoid taxes. So we need to understand the concept of black money as a parallel economy system consisting of illegal business and undisclosed business.

Black business or white, are meant to earn profits for those engaged in them; and simply keeping the money buried under the ground, earns no profits. Profits are earned not by hoarding money but by throwing it into circulation.

An enormous amount of black money flows in and out of the banking system and still remains black. A government official can take his family out for a lavish meal at a five-star hotel or buy the choicest Scotch whisky from liquor shops with cash taken as bribe. Once these sales enter the books of the hotel chain or the legitimate foreign liquor importer who pay taxes, the black money becomes “white”. Then if the hotel chain’s or the liquor importer’s liaison person pays a bribe to any official functionary (there are ingenious ways of cloaking it as a legitimate cashless transaction), the amount paid, which will not be declared by the official as income to the tax authorities, becomes black money again.

The concept of “black money” is that it is held while “white money” is used for circulation, is completely wrong.  The success of unearthing “black money” lies therefore in tracking down “black business”, not in attacking money-stock.

Modi did nothing to stop the generation of black money. One would still need to bribe to get his work done in a government office.

BJP had termed demonetisation as ‘anti-poor’ in 2014

The Bharatiya Janata Party actually came down hard against demonetisation not too long ago and slammed it as anti-poor, when UPA government pushed for a similar move in 2014.

This was just four months before Modi was elected PM. In January 2014, the Reserve Bank of India announced all currency notes issued before 2005 would be withdrawn completely from circulation. The then Prime Minister Manmohan Singh did not appear on television to announce the move. That was not needed because the withdrawal was to be done in a phased manner, over the next three months.

But the BJP had to play the role of a vocal opposition then and slammed the move left, right and centre. Meenakshi Lekhi, now the Lok Sabha member from New Delhi but then only a party spokesperson, said 65% Indians who did not have bank accounts and are largely illiterate, poor, old and living in remote areas, store their money in cash.

Lekhi even wrote an article for the Economic Times. “The latest gimmick of finance ministry… an attempt to obfuscate the issue of black money stashed outside the country.” she said.

You can read her article here.

Watch Minakshi Lekhi’s Full speech on demonetisation! Press conference Jan 23, 2014.

Demonetisation and ‘counterfeit currency’

The government has said one of the reasons to demonetise notes of Rs. 500 and Rs. 1,000 was to curb the circulation of fake currency.

Some very fundamental questions would be:

• How did the fake currencies get into the system at all?
• What steps are being taken to ensure that new currency bill will not be faked?
• If government is taking the steps now that will ensure that fake currencies does not get into the system, why was it not done before?
• How sure is our government that the new Rs 500 and Rs 2000 bill will not be forged?

We have been having old currency disappearing, new currency notes coming into being. But that did not solve the problem of counterfeiting notes. The new currency was forged. Even now, the new Rs 500 and Rs 2000 bill will get faked and will enter the system, the same way counterfeit notes entered into the system before.

Let us assume that new Rs 500 and RS 2000 cannot be forged. In that case, this is a matter which could have been done in the normal course over a period of time, without putting people into inconvenience.

But have some particular motives in demonetising and solving the problem of counterfeit notes or curbing black money is not in that list.

Read: Fake Rs 2,000 banknotes already? Unsuspecting Karnataka farmer falls victim

Demonetisation has hit not the black money hoarders but the Poor

For the last few days millions of Indians are waiting in long, unending queues to recover their own money from banks, post offices and ATMs. The government at the Centre remains firmly in denial about the untold hardship to the poor who cannot afford to stay away from their daily wage work even for a day. Some senior citizens have died of exhaustion standing in queues for hours on end. Families have suffered as private hospitals refuse to take currency notes of 1000 and 500 denomination, legal tender just till the other day.

To rub salt in their wounds Prime Minister Narendra Modi, on a visit to Japan, makes a statement that he had anticipated short term pain to the ordinary people and goes on to warn that even harsher measures could come to tackle black money in the near future. Meanwhile, the finance minister Arun Jaitley goes about his daily briefings spouting platitudes about how the people are willing to suffer some pain to promote the larger cause of fixing the black economy.

Farmers  have only one thing on their mind: how to buy seeds for sowing. As they spend most of their time queuing up at banks, with many of them returning empty-handed, time is fast running out for farmers.

The latest count of reported deaths across India that have been linked to the demonetisation chaos is 55. Mostly, it was elderly people died waiting in the queues to draw money from their own bank accounts, or to exchange their own old Rs 500, Rs 1,000 notes.

Karnataka-based politician and mining baron, G Janardhana Reddy spent just Rs 550 crore to arrange the wedding spectacle for his only daughter, Bramhani, on Wednesday — a wedding attended by politicians from both the BJP and the Congress.

There aren’t any examples better than this to depict how the rich and poor in this society have been treated by Modi’s historic demonetisation exercise. Those 55 who died from exhaustion and trauma in long queues and the Reddy wedding are two ends of this society in which we live. These figures tell us how the ‘rich and the powerful’ couldn’t care less about the cash crunch and how it is the common man, who is the actual sacrificial goat.

Reddy is only a symbol of a club of the rich and politically-powerful in this country. This club never bothered about Modi’s currency ban.

How did Reddy manage Rs 550 crore for his daughter’s marriage extravaganza? If this entire sum was plastic currency or electronic currency, Reddy holds the answer to how to turn India’s deeply-locked cash economy into a cashless one in a matter of days — he should be made the Union finance minister or Reserve Bank of India (RBI) governor, as the incumbents in these positions are struggling to achieve this goal.

Or else, even if a fifth of the money Reddy spent was in cash and if we assume that all of these aren’t Rs 100, Rs 50 and Rs 10 notes that Reddy had stored in his secret chamber before the currency ban, then the following question arises: How did Reddy manage to get new currency  of Rs 100 crore or more when common man is forced to  stand in queues for hours before so much as a glimpse of new currency notes or even the old Rs 100 note?

Did some banker or a childhood friend in the government help Reddy to get what was required to pay for the Rs 550-crore wedding gala?

The answer should come from the Income Tax Department, the police, the financial intelligence unit and ultimately, the Narendra Modi government.

The amount Reddy spent — Rs 550 crore — would fill 27,500 ATMs across the country. While the Reddy gala took place in Karnataka, there were many fathers who committed suicide across the country, as they couldn’t buy groceries or to meet other expenses for their daughters’ weddings. The loss of lives cannot be treated as a temporary pain; the issue is very serious.

A death count of 55 or so — as is being reported — happens only when there is a natural calamity or a vehicle mishap or a bomb blast, not when a “well thought-out” economic reform gets implemented by a government. No matter the long-term benefits of the demonetisation exercise, the Modi government is answerable for the difficulties and loss of lives the common man has faced in the days since the announcement.

Black money is the life blood of the political parties

In part 1, I Quoted the information by the Association of Democratic Reforms (ADR) — that in 2013-14, political parties, in their income tax returns, had declared a total income of Rs 1,519 crore (the BJP had the highest share of Rs 674 crore while Congress came second with a collection of Rs 598 crore). But income from unknown sources amount to more than 70 percent of their total income.  All such contributions were in cash.

All those who ply their black money into the coffers of the political parties in cash remain unidentified. Such illegal contributions come from two sources: First, big and medium business houses which make cash donations and keep it off their respective balance sheets. Second, wealthy individuals who make similar donations in cash. This is clearly in exchange for quid pro quo.

That explains why when more than Rs 2 crore went missing from the headquarters of the BJP in Ashoka Road in Delhi in 2008, the party decided not to file a police complaint.

But then BJP is not the only party that thrives on black money. Congress, which ruled for decades in both the Centre and several states, had made cash transactions, the life-blood of its party organisation. Most other parties which fulminated against the corrupt ways of the Congress followed its lead in institutionalising corruption in their respective party framework.

Under the aegis of the Congress government, Section 13A of the Income Tax Act enacted in 1961 exempted political parties from paying income tax. Political parties were given 100 percent tax exemption from all sources of income. The only condition stipulated in the Act (Section 139 4B) was that the political parties would be required to file income tax returns in a prescribed format every financial year, failing which the exemption would be withdrawn.

Despite such mandatory requirement, all the political parties, both national and regional, refused to file income tax returns for years but continued to enjoy income tax exemptions. This was absolutely illegal, but both the ruling and opposition parties were in cahoots to continue the illegality and the government agencies were either coerced or bribed to hold their peace.

This went on for several years till 1996, when the Supreme Court, responding to a public interest litigation filed by the Common Cause (headed by HD Shourie) gave a clear direction that the political parties failing to file income tax returns would not be covered under the Section 13A of the Income Tax Act.

The parties were then left with no option but to file their I-T returns. But since I-T returns used to be a closely guarded secret in India, that remained confined to the files of the officials who merely acknowledged the receipt of the annual returns. That brought the situation back to square one – parties could sit pretty by making any arbitrary claims, but did not have to account for it.

After the Right to Information Act was passed in 2005, the Association of Democratic Reforms (ADR) sought the copies of the I-T returns of different parties under the same Act. But the income tax department – used to the secretive manner of its functioning over the years – refused to oblige saying that information containing details of commercial activities of political parties were exempt under the RTI Act.

RK Laxman’s 1978 cartoon perfectly sums up today’s demonetisation

The ADR then moved the Central Information Commission. Most political parties, including the Congress and the BJP but excluding the Communist parties, raised their objections to the ADR appeal before the CIC on the grounds of infringement of privacy. The CIC, however, overruled the objections saying that political parties could not claim special privileges while being very much an integral part of the public life. In its order dated 29 April, 2008, the CIC directed the income tax authorities to provide to the petitioner the details of the tax returns of political parties within six weeks.

This decision was a major setback to the parties. But the greater setback came when the full bench of the CIC, in its order on 3 June, 2013, directed that six parties – Congress, BJP, CPM, CPI, NCP and BSP — be designated as public authorities under the RTI Act. “The presidents, general secretaries of these parties are hereby directed to designate CPIOs and appellate authorities at their headquarters in six weeks. The CPIOs so appointed will respond to the RTI applications extracted in this order in four weeks time,” the bench directed.

The Manmohan Singh government then considered the proposal to either issue an ordinance to nullify the CIC order or to amend the RTI Act itself to the effect that political parties were out of the purview of the RTI Act. But before it could act, the UPA went out of power.

In any case, the national parties had chosen not to comply with the CIC order. RTI activist Subhash Chandra Agrawal and Anil Bairwal of the ADR, the original petitioners to the CIC, moved the Supreme Court. In August 2015, the Narendra Modi government made it clear in its submission to the apex court that it was on the same page with the previous Manmohan Singh regime in opposing the CIC stance. Since then the matter is pending before the highest court of the land.

It is shameful that both Manmohan Singh and Narendra Modi – and their finance ministers P Chidambram and Arun Jatley respectively — made big promises in eradicating the menace of black money, but when it came to their respective political parties – which are the biggest den of the black money – these national leaders have been stubbornly refusing to come clean.

Surgical strike on black money!! or….???

Black money thrives because it plays a critical role in Indian elections and no political party of any consequence appears interested in putting an end to this.

Political parties thrive on black money. So none of the political parties taking part in electoral process would make a sincere attempt to eradicate black money.

Panama Papers 

The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca.

The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes.

Former Miss World and actress Aishwarya Rai, her father-in-law Amitabh Bachchan, businessman KP Singh of the DLF group, Sameer Gehlaut of the Indiabulls group, and Vinod Adani of the Adani group are among the 500 Indians linked to offshore firms set up in tax havens such as British Virgin Islands and the Bahamas.

Other well known names on the list include the Mumbai-based Garware family, Goa-based industrialist Anil Salgaocar and corporate lawyer Harish Salve.

During its election campaign in 2014, the Bharatiya Janata Party (BJP) had promised to bring back black money stashed away by Indians abroad. But there is no similar emphasis on unearthing it.

Read : Panama Papers: What and Who?

BJP leaders and their close associates knew about demonetisation beforehand

All ‘BJP friends’ were allegedly alerted in time to dispose off their old notes to avoid ‘substantial losses’ following Modi’s announcement on 8 November.

A BJP MLA from Rajasthan, Bhawani Singh has publicly admitted that ‘Adani and Ambani’ were informed in advance about the demonetisation plan.

Watch the video here:

There are also reports that one BJP MP, who also owns a company that manages cash movement for ATMs and banks, paid his employees six months advance salary hours before the announcement on demonetisation.

Rs 3 crore deposited’ in Bengal BJP account before demonetisation

BJP unit of West Bengal knew about the demonetisation beforehand and Rs 1 crore (in denomination of Rs 1,000 and Rs 500) was deposited at the Central Avenue branch of Indian Bank here on November 8. The money (in transactions of Rs 60 lakh and Rs 40 lakh) was deposited in a savings account no 554510034, which is in the name of the West Bengal unit of the BJP. Apart from that, Rs 75 lakh was deposited in a current account (63652513881) belonging to the West Bengal BJP unit in the same bank on November 1, Rs 1.25 crore was deposited in the same account on November 5. A total of Rs 3 crore had been deposited bank accounts of the BJP in six days preceding November 8.

Read:  Rs 3 crore cash seized from BJP leader’s car in Ghaziabad

The real reason for demonetisation

Demonetisation of Rs 500 and Rs 1000 would not even scratch the tip of the iceberg. Non of the political parties intend to eradicate black money. So what could be the real reason behind demonetisation?

Banks wrote off a total of Rs 1.14 lakh crore of bad debts

In part 1, I wrote that twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years.

The RBI disclosed that while bad debts stood at Rs 15,551 crore for the financial year ending March 2012, they had shot up by over three times to Rs 52,542 crore by the end of March 2015.

Indian banks now have close to Rs 6,00,000 crore bad loans. This demonetisation is not a step to curb black money but a measure to infuse money in those PSU banks so as to shore up their lending capacities.

Sahara and Birla bribery diary

Sahara and Aditya Birla Group diaries revealed payments of crores made to ‘CM Gujarat,’ ‘Modi ji,’ ‘CM MP,’ ‘CM Chhattisgarh’ and ‘Shaina NC Ji.’

While the Birla diary mentioned a payment of Rs 25 crore to ‘Gujarat CM, documents seized from Sahara premises were even more incriminating. On page 89 of the Sahara diary, the Income Tax department’s appraisal report mentions at least eight payments made to ‘Modi ji’ in Ahmedabad via one, ‘Jaiswal ji.’

These payments, totalling Rs 40.10 crore, were made to ‘Modi ji’ by ‘Jaiswal ji’ between 30 October 2013 and 21 February 2014. By then Modi was already the BJP’s prime ministerial candidate and had launched the campaign for the Lok Sabha elections.

On the same page, there are entries of others significant payments made to ‘CM MP,’ ‘CM Chhattisgarh’ and ‘CM Delhi.’

‘CM MP’ was paid Rs 10 crore in two installments through one ‘Neeraj Vashisht’ while payment of Rs 4 crore to ‘CM Chhattisgarh’ was made by ‘Nandi ji.’

‘CM Delhi’ received Rs 1 crore by same ‘Jaiswal’ who had made payment of Rs 40.1 crore to ‘Modi ji’ and ‘CM Gujarat’ on 23 September 2013.

Sahara and Birla were raided in October 2013 and November 2014 respectively. The tax authorities were carrying out an investigation when, all of a sudden, the man at the helm of the probe, KB Chowdary, was made the head of the Chief Vigilance Commission. This, according to the Supreme Court lawyer Prashant Bhushan, was Narendra Modi government’s first attempt to scuttle the probe.

Bhushan challenged his appointment.

On 25 October this year, Bhushan wrote to all investigating agencies including the Chief Vigilance Commissioner and the two retired judges heading the Special Investigating Team on black money about bribery details stated in Sahara diaries.

The CVC allegedly alerted Union Finance Minister, Arun Jaitley about the complaint filed by Bhushan. Jaitley, in turn, warned Modi about Sahara kickback details getting wide publicity.

Bhushan said, “Clearly, my complaint to CVC and SIT caused trepidation among the establishment. They were really worried not only about this information being in possession of others but also that complaints had now been filed to ensure no hush up was done in the probe as revelations were just too serious.”

Government insiders said that whilst the Modi government had planned to launch the demonetisation sometime early next year, his decision to announce the measure so soon left many senior leaders in the government surprised.

On 8 November, Bhushan wrote to the Settlement Commission reminding them about the seriousness of the revelation in the Sahara diaries. He requested the commission not to show any immunity in the matter.

The letter turned out to be the real ‘catalyst’ and reportedly spurred Modi to immediately do something ‘big’ to divert attention.

Bhushan said, “Since this government is very good at diverting attention, it took refuge in demonetisation on this occasion because it allowed Modi to take a moral high ground on the issue of black money. He felt that after his announcement on demonetisation, it will be difficult for people to question him on the Sahara allegations.”

Modi allegedly decided to go ahead with the demonetisation plan the same day Bhushan wrote to the Settlement Commission even though banks had ‘extremely insufficient’ cash and there was no adequate plan to calibrate the ATMs across the country. Hence the continuing chaos at banks across India.

This explains why BJP’s West Bengal unit was allegedly in a ‘hurry’ to deposit Rs 1 crore into its Central Avenue branch the same day before the announcement was publicly made.

Within a span of one week, the Modi government has had to change its directives several times. They first capped the exchange limit for old notes to Rs 4,000 but was soon forced to increase it to Rs 4,500. However, just couple of days later, it reversed its own decision by reducing the limit from Rs 4,500 to Rs 2,000.

It was only after Modi had made the announcement that his government came up with the idea to apply indelible ink on those who had exchanged their old notes once.

The government finds itself in an utter mess largely due to no planning into a decision of such magnitude. Had they stuck to their original plan of launching the measure next year, most of the present mess may have been avoided. But, it seems, the government was indeed in a hurry to go ahead with this monumental move allegedly to divert people’s attention from incredibly serious charges of corruption.

Read: Birla and Sahara bribery diaries and demonetisation: Demonetisation ka Sahara

Election in UP, Punjab, Uttarakhand and Goa

Prime Minister Narendra Modi’s demonetisation of Rs 500 and Rs 1000 notes is being directly linked to the Uttar Pradesh polls.

The BJP, which had swept the Lok Sabha elections more than two years ago, winning 70 of the 80 seats in Uttar Pradesh, is seeking to make a comeback by wresting power after 15 years from the ruling SP. The BSP is expected to give a stiff challenge to both of them.

In Punjab, after two successive terms, the ruling SAD-BJP combine is facing a tough battle from Congress on the one hand and a fledgeling AAP on the other.

Uttarakhand, where the ruling Congress staged a sensational comeback this year following a legal battle, is fighting anti-incumbency and facing challenge from the BJP.

Goa, where the ruling BJP is seeking a fresh term, is pitted against Congress and AAP.

It is no secret that elections are funded by black money. The campaign had already begun, all the parties were piling their stocks.

By banning Rs 500 and Rs 1000, BJP demonetised the other political parties and escaped the same by alerting their leaders about the move beforehand. Now the other political parties have no black money to spend for the upcoming elections.

This scenario is inherently more interesting because the black money can’t be shifted abroad, because it’s needed at home, and it also can’t be converted to immovable assets because the money needs to retain a certain amount of liquidity to be during the election.

 Eradicating black money: So easy to start, yet so tough!

Black money is the life-blood of all the political parties taking part in electoral process. Their sincerity to curb black money is questionable. This demonetisation is more a political move by the BJP government to show that it can take bold decisions and is serious about black money.

A study by the National Institute of Pubic Finance and Policy, which has not yet been published but has been submitted to the finance minister, shows about 80 per cent of major political party funding are in cash and broken into lots of Rs 20,000 or less received from unnamed individuals.

We demand Prime Minister Narendra Modi or finance minister Arun Jaitley give a commitment that the BJP will not take cash from corporate in the upcoming elections.

Ensure none of the political parties taking part in electoral process are allowed to take donation in cash.

There should not be any donation from undisclosed source.

Breaking the politics -business nexus is the first step to eradicate black money.

During its election campaign in 2014, the Bharatiya Janata Party (BJP) had promised to bring back black money stashed away by Indians abroad.

We heard about wikileaks list of Indian black money holders in Swiss bank. We heard about Panama Papers. Why is our government sitting like a lame duck?

We demand our government to investigate and take action.

We demand Reserve Bank of India not to allow compounding (recognising that an individual has erred bona fide and regularising the investment in the offshore entity post facto by imposing a penalty) or insist that individuals wind up these investments made prior to August 2013.

We demand The Income Tax department to probe if there has been ‘round tripping’ of funds i.e. routing of funds invested in offshore entities back to India, and where required, refer the cases to the Enforcement Directorate. Investigate if the offshore entities have declared all their incomes and assets to the Income Tax department.

That would be the beginning of a true surgical strike against black money.

Panama Papers: What and Who?

What is Panama Papers?

The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.

The leak is one of the biggest ever – larger than the US diplomatic cables released by WikiLeaks in 2010, and the secret intelligence documents given to journalists by Edward Snowden in 2013. There are 11.5m documents and 2.6 terabytes of information drawn from Mossack Fonseca’s internal database.

What do they reveal?

The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.

The Russian president’s best friend – a cellist called Sergei Roldugin – is at the centre of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married.

Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur David Gunnlaugsson.

An offshore investment fund run by the father of British prime minister David Cameron avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents to sign its paperwork. The fund has been registered with HM Revenue and Customs since its inception and has filed detailed tax returns every year.

What is Mossack Fonseca?

It is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee. Other services include wealth management.

Mossack Fonseca is the world’s fourth biggest provider of offshore services. It has acted for more than 300,000 companies. There is a strong UK connection. More than half of the companies are registered in British-administered tax havens, as well as in the UK itself.

The two big draws that offshore entities in jurisdictions such as British Virgin Islands, Bahamas, Seychelles and more specifically Panama, offer are: secrecy of information relating to the ultimate beneficiary owner and zero tax on income generated.

The firm is Panamanian but runs a worldwide operation. Its website boasts of a global network with 600 people working in 42 countries. It has franchises around the world, where separately owned affiliates sign up new customers and have exclusive rights to use its brand. Mossack Fonseca operates in tax havens including Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies Guernsey, Jersey and the Isle of Man.

Wealth Management and wealth transfer

Mossack Fonseca data relates to more than 200,000 companies for which the firm acted as registered agent. Often used lawfully to anonymously hold property and bank accounts, these companies were registered in a range of tax havens. The British Virgin Islands held more than 100,000 companies.

Rather than dealing directly with company owners, Mossack Fonseca mostly acted on instructions from intermediaries, usually accountants, lawyers, banks and trust companies. In Europe, these offshore facilitators are concentrated in Switzerland, Jersey, Luxembourg and the United Kingdom.

Where does the money flowing offshore come from? The information is hard to discover because real owners usually hide behind nominees, people with no real control and no assets in the company who simply lend their signature. A small sample of about 13,000 owners from all over the world, recently compiled by Mossack Fonseca, gives some indication. China and Russia top the list.

Panama Papers and Indian connection

Former Miss World and actress Aishwarya Rai, her father-in-law Amitabh Bachchan, businessman KP Singh of the DLF group, Sameer Gehlaut of the Indiabulls group, and Vinod Adani of the Adani group are among the 500 Indians linked to offshore firms set up in tax havens such as British Virgin Islands and the Bahamas.

Other well known names on the list include the Mumbai-based Garware family, Goa-based industrialist Anil Salgaocar and corporate lawyer Harish Salve.

Is it illegal?

Although offshore entities are not illegal, these companies are an easy way out for money laundering and tax evasion. The corrupt, criminals and money launderers” take advantage of anonymous company structures.

As per the Reserve Bank of India’s Foreign Exchange Management Act, no Indian individual was allowed to make a direct overseas investment until 2013. The central bank in 2013 amended the existing rules to allow direct investments in joint ventures or wholly-owned subsidiaries. But, the Indian Express investigation said that many of these companies were set up long before that.

Additionally, in 2004, the Liberalised Remittance Scheme (LRS) was introduced by the RBI, which allowed foreign remittances of up to $25,000 a year by Indian citizens. This limit is now increased to $250,000 a year.

Non-disclosure of an overseas asset (in this case the company acquired or floated) will be of interest to authorities and regulators here. Floating these companies and depending on the reason for which they are put to use, could also violate, individually or jointly, the Foreign Exchange Management Act, the Prevention of Money Laundering Act, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, the Prevention of Corruption Act and the Income-Tax Act. NRIs do not have to report their offshore entities to Indian authorities. But any income earned by them in India has to be filed with regulators in the country.

Here is a list of the prominent Indians who find themselves in the list:

Amitabh Bachchan

According to the leaked papers, Bachchan is a director of four shipping firms set up in the British Virgin Islands and the Bahamas. “The authorised capital of these companies ranged between $5,000 and $50,000, but they traded in ships worth millions of dollars,” the report said.

The first family of offshore firms. (AP Photo/Rafiq Maqbool)

On April 4, The Indian Express reported that records of Panamanian law firm Mossack Fonseca showed that actor Amitabh Bachchan served as director of four offshore shipping companies between 1993 and 1997.

A day after the report appeared, Bachchan issued a statement that he did not know any of the companies, had not been a director of any of them and that “it is possible that (his) name has been misused”.

But new records contradict Bachchan’s version.

These show that Bachchan, as director of two of these firms, took part in their board meetings “by telephone conference.”

These meetings of Tramp Shipping Limited (Bahamas) and Sea Bulk Shipping Company Ltd (British Virgin Islands), were held on December 12, 1994.

The venue of these meetings: “38/39, The Esplanade, St Helier, Jersey, Channel Islands, JE4 8SD.”

Bachchan’s name was also recorded in the list of directors and office bearers on the Certificate of Incumbency issued by both companies.

These records relate to a $1.75-million loan from a Jeddah-based investment company that also finds mention in Mossack Fonseca records.

Mossack Fonseca records show Bachchan was appointed director and managing director of Sea Bulk Shipping Company Ltd (BVI), Lady Shipping Ltd, Treasure Shipping Ltd and Tramp Shipping Ltd (Bahamas) in 1993. He was also listed under “Nombre Miembro” (member name) of these companies.

According to the new records, the boards of Sea Bulk Shipping Company (BVI) and Tramp Shipping Ltd (Bahamas) passed a resolution each on December 12, 1994.

These resolutions were in connection with a loan of $1.75 million from Dallah Albaraka Investment Company (DAICO) to one Constellation Ship Management (Bahamas) Ltd for purchasing all shares issued by Tramp Shipping and held by Sea Bulk Shipping.

For the loan, MV Sea Tramp, a ship owned by Tramp Shipping Ltd (Bahamas), was mortgaged to DAICO.

Both resolutions recorded Bachchan’s participation in the board meetings “by telephone conference”.

In their Certificate of Incumbency issued the same day, both companies also recorded Bachchan as director. The companies had the same directors, including Bachchan, and officers.

According to Mossack Fonseca records, Umesh Sahai of Jersey-based corporate service provider City Management Ltd (now Minerva Trust) was one of the founder directors of the four shipping companies and he appointed Amitabh Bachchan as director and managing director in 1993.

He also signed the board resolutions that recorded Bachchan’s participation in the December 12, 1994 meetings.

Aishwarya Rai, actress and former Miss World

The leaked papers allege that Aishwarya Rai, daughter-in-law of Amitabh Bachchan, was a director at Amic Partners Limited, a company in the British Virgin Islands before her status was changed to that of a shareholder. Even her father Kotedadi Ramana Rai Krishna Rai, mother Vrinda Krishna Raj Rai, and brother Aditya Rai were registered as Amic directors. The company was dissolved in 2008, a year after she married Amitabh Bachchan’s son, Abhishek.

K P Singh, chairman of DLF

Kushal Pal Singh, promoter of India’s largest real estate group DLF, acquired a company in British Virgin Islands, a tax haven, in which his wife Indira KP Singh is a co-shareholder, according to documents of Mossack Fonseca (MF), the Panamanian law firm that helps set up offshore entities.

Internal files of MF show that he has been described as a “politically exposed person (PEP)” by Mossack Fonseca & Co (BVI) Ltd, the registered agent for Singh’s offshore entity called Willder Ltd. Singh has been the Honorary Consul General of Monaco in Delhi since October 1990, and credited by GE’s former chairman and CEO Jack Welch for having initiated the global corporation’s India entry. In 2012 DLF made headlines over a controversial land deal with Robert Vadra, the son-in-law of Congress president Sonia Gandhi.

While K P Singh and his wife Indira became shareholders in Willder Ltd in 2013, MF records reveal that at least two other companies were set up by their family members in 2012, one each by son Rajiv Singh and daughter Pia Singh with their immediate family as shareholders.

Most offshore entities are very thinly capitalised — or, at times, the shares do not have any par value. But the Singh family’s three offshore entities — with MF as the registered agent — together hold almost Rs 67 crore or $10 million in shares, records show. Singh was ranked 130 in Forbes’ list of the world’s richest with $7.3 billion in 2011.

Sameer Gehlaut, chairman, Indiabulls

The owner of real estate firm Indiabulls bought three properties in London through family firms registered in Karnal, Delhi, Bahamas, Jersey and the UK. These properties are being developed into residential and hospitality projects. The transactions involved a complex network of companies all leading to the SG Family Trust owned by Sumita Singh, a former MLA and the Haryana Mahila Congress head, and her husband Jagdeep Singh Virk. These two are the parents of Divya Gehlaut, Sameer’s wife.

Garware family

MF records show that the Garware family, comprising Ashok Garware, Aditya Garware and Sushma Garware, is associated with a clutch of offshore entities. Ashok Garware is a shareholder in Rondor Overseas Ltd, registered in BVI on May 10, 1996, holding 1,000 shares of $1 each and a capital of $10,000.

Aditya Garware and Sushma Garware hold a Power of Attorney (PoA) in a number of Panamanian corporations that issued bearer shares.

Ashok Garware is the executive chairman of Global Offshore Services, earlier known as Garware Offshore Services, which owns and operates a fleet of anchor-handling tugs cum supply vessels and platform supply vessels in India, Europe and the Far East. Garware’s son Aditya is the managing director of Global Offshore. Other firms of the Garware Group include Garware Goa Nets, Garware Marine Industries and Garware Offshore International Services Pte.

MF documents show that Aditya and Sushma Garware held PoAs in at least six Panamian corporations: Avior SA, VRA Team Corp SA, U R Great SA, Wellman SA, Yukon Portfolio SA and Python Corp. All these corporations were floated in 2008 with Aditya and Sushma being issued PoAs for three years. But these companies were inactive since 2009 and Aditya signed off their dissolution on July 22, 2014.

Another Panamanian entity Orel Corporation SA, too, issued PoAs to Ashok Garware and Maneesha Shah in January 2011 and November 2010, respectively, but these were revoked in July 2012. The Garwares also set up Fujiyama Team Foundation with initial assets of $10,000 and Ashok, Sushma and Aditya as the principal beneficiaries. The public deed for the foundation was signed on October 26, 2010, and it was registered on November 1, 2010. However, it was struck off the register on January 15, 2013.

SHISHIR K BAJORIA

Shishir K Bajoria belongs to one of the oldest business families in Kolkata trading in jute and tea. He is the promoter of SK Bajoria Group, which has steel refractory units in six countries with an annual turnover of $200 million.

Bajoria is listed as a beneficial owner of Haptic (BVI) Limited, which was set up in the BVI on October 26, 2015 by Mossack Fonseca & Co (MF) along with First Names Group (Isle of Man), a corporate services provider.

MF records show the entity was formed “to receive assets from sister company and settle new trust” with its activities to be carried out “in Isle of Man/UK”. The value of its assets was more than $1 million. On December 2, 2015, First Names Group proposed to liquidate the company.

Core Holdings Corp (Charlestown, St Kitts and Nevis) was appointed the director and one share was issued to Castle Hill (Nominees) Ltd (Isle of Man). MF records for Haptic include a copy of Bajoria’s passport (Z002543) as proof of identity and lists Alipore in Kolkata as his India address. A close associate of former chief minister late Jyoti Basu, Bajoria quit his CPI-M membership and joined the BJP in August 2014. He is one of the key BJP campaigners in the upcoming assembly polls in West Bengal.

Jehangir Soli Sorabjee

Jehangir Soli Sorabjee, son of former attorney general Soli Sorabjee and a honorary consultant physician at Bombay Hospital, is the sole shareholder in Moonglow Investments Global Ltd, an offshore entity incorporated in the British Virgin Islands on November 24, 2010. On the same day, MF records show, he consented to act as a director of the company.

Sorabjee completed his MBBS from the Grant Medical College in the UK and his Master’s in Internal Medicine. Subsequently he worked in the UK for five years at different hospitals and obtained a postgraduate medical diploma and diploma in tropical medicine and hygiene from London.

He is currently professor of medicine and head of the department of medicine at the Bombay Hospital Institute of Medical Sciences. He is also a postgraduate teacher at the Maharashtra University of Health Sciences and has authored a number of academic publications and text book chapters.

Sorabjee said that he has complied with all disclosure norms. “The facts are correct. The company has received funds for investment sent abroad from India through the liberalised RBI scheme and is declared in my Income Tax returns to the Income tax authorities.”

Harish Salve

One of the most sought-after lawyers in the country, Harish Salve has represented celebrity clients in the Supreme Court. He was Solicitor General of India between 1999 and 2002.

MF records show that Salve and his family members registered three offshore companies in the BVI — Crestbright Ltd, Pyebush Group Ltd and Edenval Ltd — through the London-based agent Rawi & Co with Vasant Vihar in New Delhi as the India address. MF records include a recommendation letter from Salve to Rawi & Co in 2007, asking them to set up a company and a trust for Ramesh Mahajan and Asha Mahajan.

MF records show that Salve is listed as a director in Crestbright Ltd, which was registered in 2012 with Salendra Swarup as another director. The other two entities were registered in 2008 with Salve’s wife Meenakshi Harish Salve and daughter Sakshi Harish Salve as directors. MF records show that Edenval Ltd is listed as a shareholder in the incorporation documents of Pyebush Group Ltd.

Omkar Kanwar

Onkar Kanwar, chairman of Apollo Group, and his family members floated an offshore entity, J&S Systems Corporation, in BVI in 2010 and two trusts in 2014.

MF records show that the entity holds a million shares of 0.01 pence each in London Stock Exchange-listed Mercom Oil Sands plc, an apartment in London’s iconic ‘The Tower’, and accounts in Barclays Bank, Singapore, and Cayman National Bank and Trust Company Ltd in Isle of Man. The balance in Cayman on November 30, 2014 was GBP 3,65,478.26, records show.

Apart from Onkar Kanwar, Neeraj Kanwar and Simran Kanwar, who became the first shareholders in J&S on October 6, 2010, shares are also held by Onkar’s wife Taru Kanwar. J&S was registered on July 30, 2010 and the promoters disclosed that the source of funds in the entity would be proceeds from business trade.

Onkar Kanwar is categorised as a Politically Exposed Person by MF’s Compliance Department because he was a board member of the Kerala State Industrial Development Corporation from May 25, 2010 till September 20, 2014.

The address of Taru and Onkar in New Delhi’s Shanti Niketan is the same as that of Neeraj and Simran. In November 2013, the shareholding of J&S showed Onkar held 440 shares, Neeraj 570, Simran 430, Taru 100. Another 200 shares each were held by Simran and Neeraj together for their children Jai Karan and Syra. Records show that Onkar was a registered shareholder till March 14, 2014.

On January 30, 2014, Tara and Onkar floated a settlement called T&O Trust with Harneys Trustees Ltd. The final beneficiaries of the settlement were Jai Karan and Syra. On the same day, Neeraj and Simran floated a settlement S&N Trust with Harneys, listing Jai Karan and Syra as final beneficiaries.

Zavary Poonawalla

Brother of billionaire Dr Cyrus Poonawalla, Zavaray heads the managing committee of the Royal Western India Turf Club (RWITC) and is on the board of four companies that deal with real estate, construction, hospitality and stud farms.

MF records list Zavaray, wife Behroze and daughters Simone and Delna, as directors of Stallast Ltd set up in 2013 in the British Virgin Islands. Stallast was struck off the records in 2014.

Indira Sivasailam and Mallika Srinivasan

Indira Sivasailam, who died in December 2008, at the age of 73, was the wife of Anantharamakrishnan Sivasailam, chairman of Amalgamations Group. She was survived by her husband and two daughters — Mallika Srinivasan, chairman and CEO of Tractors and Farm Equipment Limited (TAFE), the third largest tractor manufacturer in the world, and the late Jayshree Venkatraman, director of TAFE (Power Source Division). Mallika is the wife of Venu Srinivasan, chairman of TVS Motors.

MF records list Indira as a shareholder in Stanbridge Company Ltd, which was incorporated in 1999 in the BVI. Records show that shares of the older couple were transferred to their daughters in 2011 and eventually, in October, 2011 Malika Srinivasan relinquished her shares “for personal reasons” to one Ved Prakash Ahuja. They also show that shares of another BVI entity, Auto Engineering Development and Research Limited, were transferred to Stanbridge. MF records show the company was struck off the records in September 2015.

ANIL VASUDEVA SALGAOCAR

A Goa-based mining baron and former MLA (Independent), Anil Vasudeva Salgaocar had set up 11 offshore companies with the help of MF, mostly in the BVI, with a majority of them being incorporated between 2004-2005 with Vasco Da Gama in south Goa as the India address. Salgaocar, 75, died in Singapore in January following illness.

These offshore entities include Ling Tao Trading Ltd, Horizon Villa Investments Ltd, GBA Shipping Ltd, Jamana Finance Limited, GBA Minerals Limited, Nickon Enterprises Ltd, General Harvest International Ltd and Crown Bright Trading Ltd, among others, with records showing that a majority were set up between 2004-2005. Records show that many of the 11 companies were struck off MF’s lists in 2007 and 2008.

Anil Salgaocar’s son Arjun Anil is also listed as a director in some companies. In 2007, Anil Salgaocar did not disclose these offshore companies to the Election Commission when he contested and won the assembly polls from Sanvordem.

Defence firms

Investigations also revealed that commissions were paid by Italian defence equipment maker Elettronica SpA through two offshore entities registered in the British Virgin Islands and Dublin for defence contracts.

The two offshore entities paid alleged commissions—ranging from 5% to 17%—to two other companies, one of which was owned by an Indian. “While the precise quantum of contracts signed by Elettronica SpA with the Indian armed forces and the commissions being paid is not known, there are documents annexed with marketing agreements which list the nature of the contracts.

 Panama Papers, Demonetisation of Rs 500 and Rs 1000 bill and black money.

Offshore entities can be and have been used by individuals to remit funds abroad. Globally, they carry a reputation of being vehicles set up by individuals and corporations to evade or avoid tax. Companies call this tax planning, the tax man sees it as tax avoidance. With coordinated moves by G-20 countries to introduce stringent anti-money laundering measures, as part of a global crackdown on tax avoidance, there is rising international scrutiny over such jurisdictions and giant company incorporators such as Mossack Fonseca which facilitate setting up of offshore entities.

Modi announced demonetisation of Rs 500 and RS 1000 bill in order to curb black money. As 500 and 1000 rupee notes are demonetized, then people with black money going to banks to exchange large amounts of old notes for the new legal tender would make the banks suspicious; and banks in turn would convey their suspicions to the tax authorities who would then catch the culprits. “Black money” would thus get exposed.

It is based on wrong assumption that “black money” actually consists of hard cash, where as in reality as stated by ED and RBI, only 6% of total black money economy is in hard cash.

Banning Rs 500 and Rs 1,000 notes won’t affect black money in forms other than currency/physical notes, such as gold, jewellery, land or any other form of wealth. . On similar lines, this move will, obviously, have little effect on black money stashed away in foreign tax havens. It would not even touch those 500 Indians whose name is there in Panama Papers.

Read:

Demonetisation Rs 500 and Rs 1000 notes. Will it curb black money?

Demonetisation Rs 500 and Rs 1000 notes. Will it curb black money? part 2

Overall, intention of Modi or BJP government to curb black money is questionable. This is more a political move by the government to show that it can take bold decisions and is serious about black money.

We demand Reserve Bank of India not to allow compounding (recognising that an individual has erred bona fide and regularising the investment in the offshore entity post facto by imposing a penalty) or insist that individuals wind up these investments made prior to August 2013.

We demand The Income Tax department to probe if there has been ‘round tripping’ of funds i.e. routing of funds invested in offshore entities back to India, and where required, refer the cases to the Enforcement Directorate. Investigate if the offshore entities have declared all their incomes and assets to the Income Tax department.

Sources:

https://panamapapers.icij.org/

http://panamapapers.sueddeutsche.de/articles/56febff0a1bb8d3c3495adf4/

https://www.theguardian.com/news/series/panama-papers

https://www.theguardian.com/news/2016/apr/03/iceland-pm-calls-snap-election-offshore-revelations

https://www.theguardian.com/news/2016/apr/04/panama-papers-david-cameron-father-tax-bahamas

“Panama Papers: Ajay Devgan took over BVI firm, says government knows”. The Indian Express. May 4, 2016.

“Panama Papers: Bollywood star Bachchan denies offshore links”. BBC. April 6, 2016. 

Express News Service (April 5, 2016). “#PanamaPapersIndia Part 1: Clients who knocked on a Panama door”. Indian Express.

“Panama Papers: From Amitabh Bachchan to Adani’s brother, names of 500 Indians leaked”. Business Standard. April 4, 2016. 

Birla and Sahara bribery diaries and demonetisation: Demonetisation ka Sahara

Delhi chief minister, Arvind Kejriwal, has made sensational allegations against Prime Minister Narendra Modi accusing him of having accepted black money from Sahara and Birla.

 

Sahara and Aditya Birla Group diaries revealed payments of crores made to ‘CM Gujarat,’ ‘Modi ji,’ ‘CM MP,’ ‘CM Chhattisgarh’ and ‘Shaina NC Ji.’ While the Birla diary mentioned a payment of Rs 25 crore to ‘Gujarat CM , documents seized from Sahara premises were even more incriminating. On page 89 of the Sahara diary, the Income Tax department’s appraisal report mentions at least eight payments made to ‘Modi ji’ in Ahmedabad via one, ‘Jaiswal ji.’

These payments, totalling Rs 40.10 crore, were made to ‘Modi ji’ by ‘Jaiswal ji’ between 30 October 2013 and 21 February 2014. By then Modi was already the BJP’s prime ministerial candidate and had launched the campaign for the Lok Sabha elections.

On the same page, there are entries of others significant payments made to ‘CM MP,’ ‘CM Chhattisgarh’ and ‘CM Delhi.’

‘CM MP’ was paid Rs 10 crore in two installments through one ‘Neeraj Vashisht’ while payment of Rs 4 crore to ‘CM Chhattisgarh’ was made by ‘Nandi ji.’

‘CM Delhi’ received Rs 1 crore by same ‘Jaiswal’ who had made payment of Rs 40.1 crore to ‘Modi ji’ and ‘CM Gujarat’ on 23 September 2013.

On page 90 of the report, a list of similar payments are outlined, but here ‘Modi ji’ is stated as ‘CM Gujarat’ while the person, who made these payments remained ‘Jaiswal ji.’

On Page 91, other names include one ‘Shaina ji NC,’ who was paid through ‘Uday Ji.’ ‘Ms Shaina NC ji’ is stated to have been paid Rs 4 crore. According to the documents, ‘Shaina ji NC’ was paid Rs 4 crore in four installment between 28 August 2013 and 20 January 2014.

Page 92 has the list of several names, who are yet to be paid their promised amount. The sheet also has a line, which says, ‘Shania NC/Chief of BJP- ask her to help from A.(Advocate) General to withdrawal(close) Bombay case.’

Background

Sahara and Birla were raided in October 2013 and November 2014 respectively. The tax authorities were carrying out an investigation when, all of a sudden, the man at the helm of the probe, KB Chowdary, was made the head of the Chief Vigilance Commission. This, according to the Supreme Court lawyer Prashant Bhushan, was Narendra Modi government’s first attempt to scuttle the probe.

As expected, Bhushan challenged his appointment.

Meanwhile, Sahara had already approached the Income Tax Settlement Commission.

But the question is; why did Sahara choose to approach the Settlement Commission as opposed to challenging the allegations against the company in the court of law?

Sahara opted for the legal route because the process of going through the tribunal and appeals in lower court to the Supreme Court would have lasted for years. This would have meant that income tax authorities needed to retain all the seized documents, which had incriminating evidence against the powerful leaders.

This would have kept the noose hanging over those whose names appeared in the diary. It was in the interest of both Sahara and the leaders, mentioned in the diary, to have these documents destroyed.

So, how do they destroy documents, already in IT department’s possession?

Income Tax Settlement Commission

Set up in 1976, Income Tax Settlement Commission allows a ‘one-time tax evader or an unintending defaulter to make clean breast of his affairs.’

This is what the Settlement Commission’s website states on its existing provision, “The settlement mechanism allows taxpayers to disclose additional Income before it over and above what has been already disclosed before the Income tax Department. The applicant has to pay full amount of tax and interest on the additional income disclosed before the Commission, before filing the application. The Commission then decides upon the admissibility of the application and in case of admitted applications, carries out the process of settlement in a time bound manner by giving opportunity to both parties.”

The commission has ‘wide power of granting immunity from Penalty and prosecution’ and ‘most crucially, the ‘orders passed by the Commission are final and conclusive.’

In essence, its order can’t be challenged in the court of law.

The benefit of the settlement mechanism ‘can be availed by a taxpayer only once in life-time.’ With these benefits in mind, Sahara moved the Settlement Commission, which has reportedly concluded the final hearing and the verdict is imminent any time now.

Should the Settlement Commission rule in Sahara’s favour, the company has the right to ask for the documents seized from its premises back. This will provide Sahara an opportunity to destroy the documents, leaving no trace for the future.

Demonetisation link

On 25 October this year, Bhushan wrote to all investigating agencies including the Chief Vigilance Commissioner and the two retired judges heading the Special Investigating Team on black money about bribery details stated in Sahara diaries.

The CVC allegedly alerted Union Finance Minister, Arun Jaitley about the complaint filed by Bhushan. Jaitley, in turn, warned Modi about Sahara kickback details getting wide publicity.

Bhushan said, “Clearly, my complaint to CVC and SIT caused trepidation among the establishment. They were really worried not only about this information being in possession of others but also that complaints had now been filed to ensure no hush up was done in the probe as revelations were just too serious.”

Government insiders said that whilst the Modi government had planned to launch the demonetisation sometime early next year, his decision to announce the measure so soon left many senior leaders in the government surprised.

On 8 November, Bhushan wrote to the Settlement Commission reminding them about the seriousness of the revelation in the Sahara diaries. He requested the commission not to show any immunity in the matter.

The letter turned out to be the real ‘catalyst’ and reportedly spurred Modi to immediately do something ‘big’ to divert attention.

Bhushan said, “Since this government is very good at diverting attention, it took refuge in demonetisation on this occasion because it allowed Modi to take a moral high ground on the issue of black money. He felt that after his announcement on demonetisation, it will be difficult for people to question him on the Sahara allegations.”

Modi allegedly decided to go ahead with the demonetisation plan the same day Bhushan wrote to the Settlement Commission even though banks had ‘extremely insufficient’ cash and there was no adequate plan to calibrate the ATMs across the country. Hence the continuing chaos at banks across India.

All ‘BJP friends’ were allegedly alerted in time to dispose off their old notes to avoid ‘substantial losses’ following Modi’s announcement on 8 November. This explains why BJP’s West Bengal unit was allegedly in a ‘hurry’ to deposit Rs 1 crore into its Central Avenue branch the same day before the announcement was publicly made.

A BJP MLA from Rajasthan, Bhawani Singh has publicly admitted that ‘Adani and Ambani’ were informed in advance about the demonetisation plan.

There are also reports that one BJP MP, who also owns a company that manages cash movement for ATMs and banks, paid his employees six months advance salary hours before the announcement on demonetisation.

The central government has been condemned for its inability to deal with the fallout of the demonetisation announcement.

Within a span of one week, the Modi government has had to change its directives several times. They first capped the exchange limit for old notes to Rs 4,000 but was soon forced to increase it to Rs 4,500. However, just couple of days later, it reversed its own decision by reducing the limit from Rs 4,500 to Rs 2,000.

It was only after Modi had made the announcement that his government came up with the idea to apply indelible ink on those who had exchanged their old notes once.

It was also after 47 people had died that the government increased the weekly withdrawal limit to Rs 24,000 for everyone and Rs 25,000 for farmers.

The government finds itself in an utter mess largely due to no planning into a decision of such magnitude. Had they stuck to their original plan of launching the measure next year, most of the present mess may have been avoided. But, it seems, the government was indeed in a hurry to go ahead with this monumental move allegedly to divert people’s attention from incredibly serious charges of corruption.

Demonetisation Rs 500 and Rs 1,000 notes. Will it curb black money?

The current notes of Rs 500 and Rs 1000 will no longer be valid from November 8 midnight, Prime Minister Narendra Modi announced in a televised address to the nation. Instead, notes of Rs 2000 and a newly designed Rs 500 are being introduced.

Here are highlights from his speech:

• Corruption and black money are the biggest hindrances in the fight against poverty, PM says adding that it is everyone’s responsibility to eradicate poverty.
• Terrorists from across the border are spreading counterfeit currency notes.
• Corruption, black money and terrorism can come in the way of a country’s robust economic growth.
• Rs. 500 and Rs.1000 notes are mostly used in black money
• From midnight of November 8, 2016, Rs. 500 and Rs.1000 will cease to be legal tender. “These notes are just papers from tomorrow.”
• These notes should be exchanged in banks and head post offices and sub post office within December 30, 2016, by providing a valid identity proof such as Aadhaar, PAN card or voter ID card.
• People who possess Rs.500 or Rs. 1000 currency notes after December 30 can exchange it at Reserve Bank of India by providing a declaration. This is till March 31, 2017.
• The ATMs will not function till November 9, and in some places till November 10.
• There are, however, some exemptions. Government hospitals and international airports.
• Rs 10,000 daily cash withdrawal and Rs 20,000 weekly cash withdrawal limit.
• There is no restrictions on internet banking, cash, demand draft transactions.
• Banks will be closed on November 9.
• A new series of Rs. 500 currency notes and Rs. 2000 currency notes will be brought into circulation.

The backdrop of the scene

On October 27, just few hours before the expiration of the Income Declaration Scheme (to disclose black money), officials at the Income Tax Towers at AC Guards in Hyderabad were in for a shock. A frail-bearded individual who claimed to be Gopalan had brought thirteen suitcases full of assorted currency, some in haphazard bundling. There were seven American Tourister suitcases with Rs 1,000 notes, and the rest with Rs 500 notes. It took a dozen of IT sleuths and half a dozen counting machines to complete the task in five hours.

The officials did not mind though, as the Finance Ministry ranked the team first and announced a bonus for them all. “He made us famous and took us to top of the list,” says a senior IT official with glee.

It was not just the IT officers who were gleeful though. The ruling Telugu Desam Party (TDP) too were in joy. The frail Gopalan had given them enough grist to start a mudslinging fest.

Immediately following this episode, Andhra Pradesh Chief Minister Chandrababu Naidu launched a verbal attack on his opponent and Opposition leader YS Jaganmohan Reddy. “I want the Centre to demonetise all the Rs 1,000 and Rs 500 notes if it really wants to end the reign of black money in the country,” he said.

Naidu did not stop at this statement, though. He went ahead and wrote a letter to Prime Minister Narendra Modi with his demand, but not bothering to explain his logic behind it. The publicity wing of the ruling Telugu Desam Party (TDP) then launched a tirade against Jagan, alleging that he was the one who disclosed the hoard, citing sources from the NDA government.

After the Congress came to power in 2004, Jagan had paid an income tax of Rs 7 crore against Rs 2.9 lakh he paid in 2002. In the wake of CBI cases foisted on him in 2012-13, Jagan had made advance tax payment of Rs 84 crore. In the 2014 election affidavit, he had mentioned an asset base of Rs 416 crore and liabilities of Rs 137 crore. In the year 2015, Jagan made an advance tax payment of Rs 22 crore. These figures are also bandied about by the TDP to fling mud at their main Opposition party, hoping that some of it will stick.

But Jagan and YSR Congress party leaders are not silent spectators. They ask how Chandrababu Naidu became rich with just two acres of ancestral property in his native Naravaripally village of Chittoor. They allege that Naidu amassed wealth during his first tenure, and now again in the current tenure. “Naidu had made corrupt money worth Rs 1.32 lakh crore after Amaravati, Pattiseema, Polavaram and Rayalaseema (irrigation) projects,” says Ambati Rambabu, YSRC spokesperson.

If Naidu could write a letter to the Prime Minister, so could Jagan. So, he wrote to the PM demanding all names involved in the disclosure of Rs 13,000 crore worth of black money in Hyderabad to be made public. “Why is Chandrababu alone privy to that information and not the public?” he asked in a two-page letter. The Prime Minister’s Office has not responded to either of these letters. “It is also an irony that just recently AP, under Naidu, has been ranked as the most corrupt state in the country by National Council for Applied Economic Research (NCAER),” adds Jagan.

Naidu’s son Lokesh jumped into the fray to take on Jagan disclosing family assets for the sixth time since 2011, an exercise Naidu began five years ago to gain a “Mr Clean” image ahead of polls. Naidu declared a net worth of Rs 3.73 crore (1,312 times less than Jagan) and his wife Bhuvaneshwari net worth was Rs 33.66 crore. Son Lokesh declared Rs 14.5 crore, daughter-in-law Brahmani declared Rs 5.38 crore and his grandson Devansh Naidu Rs 11.7 crore. “No other political family has declared its property list in such a transparent manner,” said Lokesh, as he made the declaration.

The hard facts

From November 10 till December 30 you can deposit the old notes at your nearest bank or post office accounts without any limit.

Black money or unaccounted money, often used in any form of corruption or illicit deals, usually takes the form of high-value notes, which in this case are the Rs 500 and Rs 1,000 bills. Now if someone wants to deposit the black money he has in the form of Rs 1000 and Rs 500  currency notes in the bank, from his PAN information, government would know that it is illegal money and he would be behind bars. Neither can he use those currency notes elsewhere. So practically those currency notes are just pieces of paper.

Is it a historical step taken by Modi?

While Prime Minister Narendra Modi might have taken India by surprise, the move to demonetise high denomination notes is not unprecedented in Indian history. In January 1978, the Indian government had demonetised Rs 1,000, Rs 5,000 and Rs 10,000 notes in a bid to counter black money in the economy.

Even then the move was aimed tackling the issue of the black money economy which was quite substantial at that point of time. The move was enacted under the High Denomination Bank Note (Demonetisation) Act, 1978. It was termed as “an Act to provide in the public interest for the demonetisation of certain high denomination bank notes and for matters connected therewith or incidental thereto.”

Under the law all “high denomination bank notes” ceased to be legal tender after January 16, 1978. There was a prohibition of transfer and receipt of high denomination bank notes. Plus, all banks and government treasuries had to send to the Reserve Bank the total value of high denomination bank notes held by it at the close of business on the January 16.

People who possessed these notes were given till January 24 the same year — a week’s time — to exchange any high denomination bank notes. The one big difference with the announcement Tuesday is that Rs 1,000 and higher value notes were almost impossible to possess then for the common man given the value of these amounts then.

In February this year, European Central Bank head Mario Draghi announced that they were considering abolishing the region’s most-valuable bank note (the 500 euro bill) in order to curb tax evasion and terrorism financing.

In the same month, US treasury secretary Larry Summers recommended that the $100 bill be demonetised.

Peter Sands, a senior fellow at Harvard University’s Kennedy School of Government, in recent times, has done some interesting work regarding banning large-value notes as a means of cracking down on global crime and corruption. An introduction to this work can be found here.

The call to retire Rs 1,000 and Rs 500 notes has also been made before outside and within India by economists, think-tanks and even politicians.

Will it tackle black money?

Will demonetisation of Rs 500 and Rs 1000 curb black money or is it just another gimmick politics of Modi?

Only a small percentage of black money is in the form of hard cash currency notes. (ED and RBI estimates that 6% of the total black money is in hard cash.) Most of it is used to buy land, gold or transferred to foreign banks. We all know ‘hawala’.

A small village near Mogalthuru (native to film star Chiranjeevi) was known for its fine collection of Harley Davidson bikes, Lenovo laptops, Apple iPhone 6 smartphones, and Paris Hilton fashion. Recently one resident of this village acquired a Rolls Royce Phantom car, and it made a journey of only three kilometres every evening, because that was the length of the only motorable road in the village. “I earn as much as Rs 72 lakhs as my share from paddy, sugarcane and tobacco crops twice a year. I pay no tax and can buy anything,” says Sunil Raju, a farmer in Mogalthuru village.

Modi did not give any estimate for how much of India’s black money is in forms other than currency/physical notes, such as gold, jewellery, land or any other form of wealth. Therefore, while banning Rs 500 and Rs 1,000 notes may tackle the black money that is in the form of hard cold cash, it won’t affect other forms of black money. On similar lines, this move will, obviously, have little effect on black money stashed away in foreign tax havens.

Banning Rs 500 and Rs 1000 only scratches the surface

We all know how unaccounted money gets into our economy.

The practice of siphoning off ‘black money’ – the illegal earnings of India’s rich and powerful – has many dire implications, including a crippling effect on the country’s efforts at fighting poverty, illiteracy and other socio-economic challenges.

BJP, which was the main opposition party in 2011, constituted a task force to study the phenomenon of black money and released a report later. The following year, the UPA government presented a white paper on black money in parliament. The presentation of this ninety-seven-page report was among the many actions that the government promised.

The white paper quoted a report by the World Bank in July 2010 that estimated ‘shadow economies’ of 162 countries from 1999 to 2007. It said that the weighted average size of the shadow economy (as a percentage of official GDP) of these countries in 2007 was 31% compared to 34% in 1999. For India, these figures were 20.7% and 23.2 % respectively. The government admitted that its own Department of Industrial Policy and Promotion (DIPP) found that the foreign direct investment from Mauritius between April 2000 and March 2011 was 41.8% of the entire amount received by India.

‘It can be seen from this table that the two topmost sources of the cumulative inflows from April 2000 to March 2011 are Mauritius (41.8%) and Singapore (9.17%). Mauritius and Singapore with their small economies cannot be the sources of such huge investments and it is apparent that the investments are routed through these jurisdictions for avoidance of taxes and/or for concealing the identities from the revenue authorities of the ultimate investors, many of whom could actually be Indian residents, who have invested in their own companies, through a process known as round tripping’ – that was the government accepting the reality.

The big problem is that there are no reliable estimates on how much is siphoned off, where it comes from, or what proportion of it may be linked to criminal activities. Even the government does not know how much of this black money comes from criminal proceeds and what percentage is ‘just’ tax avoidance. Many of India’s successful businessmen have over the years obtained the status of ‘non-resident Indians’ to avoid paying income tax and answering uncomfortable questions about their income and investments at home and abroad. According to an estimate by the research agency New World Wealth in March 2016, India saw the fourth biggest outflow of high-net-worth individuals globally in 2015 with 4,000 millionaires changing their domicile. Ironically, much of the information we have on how the Indian system actually works comes from the result of investigations abroad – the result of foreign firms trying to win contracts in India coming to the attention of authorities back home.

Bribes are spread far and wide, and reach every level of the food chain, from political leaders to the attendants guarding the doors of government offices. With almost everyone benefiting from the largesse, a conspiracy of silence sets in. And that, more than anything else, explains why India’s corrupt procurement system rarely sees the emergence of whistle-blowers.

Narendra Modi and Gautam Adani

Cutting the ground from under one’s own feet

In India, the Rs 500 and Rs 1,000 notes also constitute a huge percentage of the money spent by governments, political parties and candidates during general elections. A Centre for Media Studies report showed that nearly Rs 30,000 crore was spent during the 2014 general election, while official spending only accounted for Rs 7,000-Rs 8,000 crore.

In this system it is impossible to take part in the electoral system without these huge some of money.

On 28 May 2014, on its first day in office, Prime Minister Narendra Modi’s BJP government announced its first significant decision: the constitution of a special investigation team (SIT) led by a retired Supreme Court judge to look into black money. In his high-decibel campaign against the ruling UPA government prior to the general election, Modi’s most frequent reference was to black money. He rode the gigantic wave of anti-corruption that had built up around the country. While the movement itself was mostly apolitical and civil-society-driven, Modi was its biggest political beneficiary as he unleashed the most expensive campaign India had ever seen: chartered aircraft, helicopters, holograms, media campaigns, unabashed social media and internet strategies. It was hardly surprising then that, on his first day in office, Modi announced the setting up of that SIT.

Ironically, the biggest black money case that has come up before the SIT so far is that of the Adani group, promoted by Gautam Adani, one of Modi’s closest associates. It is in his chartered aircraft that the soon-to-be prime minister zipped around India, accusing the incumbent government of not fighting corruption. The Adani group allegedly took out over Rs 5,000 crore to tax havens, using inflated bills for the import of power equipment from South Korea and China, the SIT on black money was told by the Directorate of Revenue Intelligence (DRI) and the Enforcement Directorate (ED).

According to a senior ED official associated with the SIT, if the Adani case reaches its logical conclusion, the group will have to pay a fine of around Rs 15,000 crore. ‘It is a watertight case,’ he said, about the trail of documents showing how the group diverted Rs 5,468 crore to Mauritius via Dubai. The Adani group vehemently denies any wrongdoing. Modi, after his rhetoric-filled ride to power, has been silent.

Since Modi’s ascension to office, what has happened in the ED, which had registered a preliminary case against Adani in Ahmedabad and was handed details of DRI findings, is illustrative. The officer heading the Ahmedabad branch of the directorate was raided by the CBI, which accused him of possessing disproportionate assets. It failed to prove anything at all, despite months of investigation. The two senior-most officers in the Mumbai regional office, who oversaw the investigations in Ahmedabad, were forced out of the agency. The tenure of Rajan S. Katoch, who was heading the directorate when the case was opened, also ended abruptly. Apart from the Adani case, the Ahmedabad ED investigators were also pursuing some of the biggest money launderers of Gujarat.

So will Modi, a puppet of Adani-Ambani, be cutting the ground from under his own feet?

Where do we stand?

The numbers and calculations for this are mind-boggling. According to the RBI press conference today, there are 16.5 billion ‘500-rupee’ notes and 6.7 billion ‘1000-rupee’ notes in circulation right now.

In addition to this, RBI data shows that the share of Rs 1,000 notes in the stock of currency in circulation at the end of financial year 2014-15 was  39%. Rs 500 notes accounted for a further 45% of currency stock.

Putting it simply, at the stroke of midnight, a little over 80% of the cash in India (by value) will be worthless pieces of paper.

How much will this decision cost us? Or more importantly, why will it cost us anything at all? Firstly, because the Rs 1,000 note costs the least to produce as a proportion of face value.  It costs India around Rs 3 to print a Rs 1,000 note (0.32% of face value), while it costs 96 paise to print a Rs 10 note (9.6% of face value).

Total cost of printing the value of Rs 500 and Rs 1,000 notes issued in 2014-15 in the form of Rs 100 notes would be around Rs 11,900 crore. This doesn’t include the costs involved in increased replenishment and maintenance of ATMs, which would be required because of the usage of and withdrawal of smaller-value notes will be far greater.

The Rs 2,000 note has apparently been in the works for sometime. A report published by The Hindu Businessline almost three weeks ago (October 21, 2016) notes that Rs 2,000 notes would be coming soon and that the RBI said they hadalready started being printed and that their dispatch from a printing press in Mysore was underway.

This, however, brings us to the larger question: Why do we need a Rs 2,000 note and a new Rs 500 note if the move is to abolish large-value bills?

One potential answer is that there is still some need, especially among India Inc and small businesses to use cash and the Rs 2,000 note will help. It does seem a little puzzling however.

Attempt to solve the puzzle

Twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years.

The RBI disclosed that while bad debts stood at Rs 15,551 crore for the financial year ending March 2012, they had shot up by over three times to Rs 52,542 crore by the end of March 2015.

Indian banks now have close to Rs 6,00,000 crore bad loans.

The total Gross Non Performing Assets (GNPAs) of banks stood at Rs 5,94,929 crores as at end March 2016,marking a substantial jump of about Rs 200,000 crore in just one quarter (at the end of December 2016 quarter, the total GNPAs stood at about Rs 4,00,000 crore.) Over 90 per cent of this is on the books of public-sector banks (PSBs).

The Anil Ambani-led Reliance Group alone owes Rs 1,21,000 crore of loans to the banks and had an annual interest liability of Rs 8,299 crore against earnings before income tax of Rs 9,848 crore.

The Vedanta group, Anil Agarwal’s company is the second-most indebted company. According to Credit Suisse, the company, which is into metals and mining, had a debt of Rs 1.03 lakh crore.

Shashi and Ravi Ruia’s Essar group has gross debt of Rs 1,01,461 crore.

The billionaire Gautam Adani’s (known for his proximity with Prime Minister Narendra Modi Adani) group has Rs 96,031 crore debt.

Manoj Gaur-run Jaypee Group has a debt of Rs 75,163 crore on its balance sheet. Jaypee Group had a golden time during the Mayawati rule in Uttar Pradesh between 2007 and 2012.

G.M. Rao’s GMR group known for building Delhi’s T3 International Airport terminal.
The group has a debt of Rs 47,976 crore on its balance sheet.

As per the Credit Suisse report, Jindal group has a debt of Rs 58,171 crore.

Lanco Group, headed By L Madhusudan Rao, the company runs solar and thermal power plants. It has a debt of Rs 47,102 crore.

Venugopal Dhoot’s Videocon Group, once famous for making televisions, owes Rs 45,405 crore to banks.

Founded by GVK Reddy, GVK group has interests in energy, infrastructure and hospitality sectors. The company has a debt of Rs 33,933 crore.

Industrialist Mukesh Ambani was named India’s richest person for a ninth year in a row with a sharp increase in his net worth to $22.7 billion on the annual Forbes list of India’s 100 Richest People. Mukesh Ambani’s Reliance Industries (RIL) is India’s largest debtor has a total debt of Rs 1,87,079 crore (up from Rs 62,500 crore as on March 31, 2010, mainly because of the Rs 1,50,000 crore roll-out of Reliance Jio), the biggest among all corporate houses, and the largest ever in Indian corporate history.

The PSU banks cumulatively suffered losses of Rs. 18,000 crore in the last fiscal mainly on account of higher provisioning for bad loans. The government is committed to providing capital over and above the budgeted Rs. 25,000 crore for this fiscal.

Moody’s Investors Service said  bank shares are trading below book value which constrains their ability to raise capital from the capital market. The government will have to infuse Rs. 1.2 lakh crore into PSU banks to bolster their balance sheets and make good the losses suffered by them.

This is way higher than an additional Rs. 45,000 crore capital infusion plan envisaged by the government.

In August 2015, the government had budgeted a total of Rs. 70,000 crore to be disbursed to the PSBs over four years.

As of end March 2016, it had already disbursed about Rs. 25,000 crore of this amount.

Another Rs. 10,000 crore has been budgeted for infusion in each of 2017-18 and 2018-19.

As demonetisation of Rs 500 and Rs 1000 is announced, we see people queuing up in front of the banks, waiting for hours to deposit their money.

This demonetisation is not a step to curb black money but a measure to infuse money in those PSU banks so as to shore up their lending capacities.

The final goal

Amitabh Bacchan, Ajay Devgan and Aishwarya Rai – all these three names came up in Panama papers. All these 3 praised the demonetisation and appreciated the PM for action against black money.

Sharad Pawar, Yeddyurappa and Nitin Gadkari – all these politicians have touched the peaks of corruption… all these 3 praised the action against corruption and black money.

When corrupt politicians like BSY and Gadkari or Tax evaders like Baba Ramdev are welcoming this demonetisation, it should be understood that their black money is safe! The illegality runs deep and has a long history. Unfortunately, simply demonetising Rs 500 and Rs 1,000 notes will not help.

The ray of hope is that a silent revolution is going on through implementation of  ‘Neo-Socialism’. It  has established its strong foothold in countries like Nepal, Venezuela and Bolivia. Self-reliant villages with the aid of communes, co-operatives, joint farming etc had been set up in more than 280 of the 600 districts in India.

The Neo-Socialist movement, based on the theory of setting up of communes, cooperatives and self-contained rural communities has intensified manifold and keeps on doing so. The advancement of this movement across the globe has panicked and sent shivers down the spine of the political, cultural and financial tyrants, who are now hell-bent to mash the progress of such silent revolution by applying brutal force, torture and terror.

The question is whether the formation of this pattern of democracy of supreme equality is possible in reality? The answer is yes and we can vividly hear its vibrant footsteps in parts of India, Nepal, Venezuela, Argentina, Brazil, Peru, Chile and Bolivia.

This new order of democratic system or set-up is based on communes, collective farming and co-operatives in many parts of India. Right now the figure is very close to half of the total number of Indian districts and the number is on the rise.  In Nepal, for instance, the rule of monarchy has been overthrown and about 80% of the area has come under the fold of such commune.

In Venezuela, the battle was on under the able leadership of Hugo Chavez against the policy of repression by the army and other fascist forces. The people of Venezuela has snubbed the global guidelines imposed by the World Bank and IMF and are working to form their own economic system based on self-reliant groups and co-operatives. The nation is expanding its democratic arrangement from the grassroots level through optimum utilization of their oil reserve and self-contained counties. The movement in Venezuela has caught up with adjoining nations like Argentina, Brazil, Peru, Bolivia etc. The people of those countries are also determined to free themselves from American imperialism. We can see the people there raising their heads in revolt and a mass upsurge is clearly in the offing.

The march of the mass towards a new dawn of true democracy, fraternity and liberation cannot be stopped.

Sources:

• The Times of Inda
• The Indian Express
• The Hindu
• The Hindustan Times
• Josy Joseph,  A Feast of Vultures: The Hidden Business of Democracy in India, published by Harper Collins India.
• http://www.npr.org/2016/02/27/468402317/do-big-cash-denominations-help-organized-crime
• India News
• Credit Suisse report titled “House of Debt”
• Economic Times