Discussion on "Jammu & Kashmir : New Vision - New Narrative" on Saturday, 30th November 2019 at Auditorium, Jammu Club, M.A.M, Sports Complex, Jammu

Fight against Corruption & Black MoneyFight against Corruption & Black Money Fight against Corruption & Black Money

Kishore Desai

2G, 3G, CWG (Commonwealth Games), Coalgate etc. are terms that most of us are familiar with. These terms symbolized the mega scale of corruption that became commonplace during the entire tenure of the UPA II government. The sheer size and scale of corruption was also unprecedented with media reports alleging the above scandals to have costed the nation more than a few lakh crores. Such levels of corruption not only robbed the poor and the needy of the scarce public resources that could otherwise have been utilized for developmental projects but it also severely impacted the speed and the quality of governance in the country bringing. It brought down the trust and faith all of us had in our own government. No wonder, when the nation went to polls in 2014, eliminating corruption became one of the most important issues for electing the next government. People expected the incoming government to take stern and decisive action against corruption and steer the country away from this malaise. It is in this context that the NDA government led by Prime Minister Modi assumed office in May 2014.

Immediately after assuming office, the Prime Minister and his government signaled zero tolerance towards corruption and showed a clear determination to do whatever it takes to eliminate it from the country. The first decision of the newly formed government was against corruption and black money. In its first meeting, the Cabinet led by the Prime Minister Modi set up a Special Investigation Team (SIT) headed by a retired judge of the Supreme Court to bring back black money into the system. Gradually, the government rolled out a comprehensive multi-dimensional strategy to dismantle the roots of corruption and unearth black and unaccounted money. This comprehensive strategy comprised of the following broader themes as discussed below.

Putting in place robust legislative and administrative mechanisms

The government enacted a number of new laws to eliminate corruption and bring back black money both in India and abroad. These laws plugged the gap in the legal system and provided the necessary backing to the administration to act firmly and decisively against the entire gamut of evils associated with corruption and black money. In 2015, a new law was enacted to address black money stashed abroad. Titled, ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’, it prescribed stringent punishments to offenders and made it extremely difficult for those operators who routinely evaded taxes and laundered money for themselves and their powerful clients. A one-time compliance window was also given to truthfully declare undisclosed foreign assets before the culprits were to be subjected to this law. Later in 2016, the Benami Properties Act was passed to enable confiscation of benami property and prosecution of benamidar and the beneficial owner. A Fugitive Economic Offenders Ordinance, 2018 (“the Ordinance”) was also passed to empower the government against high profile individuals like Vijay Mallya, Nirav Modi, Mehul Choksi etc. who could easily abuse the legal gaps to their own advantage. This law empowered the administration to attach and confiscate proceeds of crime associated with economic offenders and the properties of the economic offenders thereby deterring these individuals from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.

Implementing Innovative Policy Measures

The second theme relates to implementing innovative policy measures. Starting with the real estate sector that was rife with corruption and black money, the government brought in RERA (Real Estate Regulation and Development Act). This new buyer-friendly law has shielded common individuals from the corrupt means of real estate developers. Builders can no longer give a false impression of a property’s size by citing ‘built-up’ or ‘super built up’ areas, making it mandatory for them to transparently quote the ‘carpet area’ in all agreements. Further, builders are required to deposit 70% of the project cost in separate bank accounts, that has not only helped curb financial risks that consumers face but also forced builders to reduce the use of cash that contributed to generation of black money in the first place.

The government has not only focused on eliminating high level corruption but has brought in measures that help common people on a regular basis. Now government welfare schemes are no longer plagued with leakages and middle men. Money is transferred directly in the account of beneficiaries through the Direct Benefit Transfer (DBT) scheme. Beyond DBT, recruitment for junior government jobs have been re-designed to only focus on merit through transparent, online processes leading to less Government and more Governance. Interviews for junior level posts Group ‘B’ (non-gazetted), Group ‘C’, Group ‘D’ and such equivalent posts have been abolished. Not just interviews, but the government has proactively taken a strong step to restore the dignity of common people by eliminating their dependence on government officials. Citizens are no longer required to get their documents such as birth certificates, marksheets attested by gazetted officers. Now they can self-attest these documents and any scope of corruption in this activity has been eliminated.

Another crucial policy measure to tackle corruption came in the natural resources sector. After the Supreme Court cancelled the coal block allocations under UPA, the government acted with unparalleled swiftness to institute an innovative transparent & timely auctioneering process based on reverse auction. This policy led to auctioning 67 coal blocks estimated to bring in a revenue of INR 3.35 lakh crores to the exchequer over the life of the mine. In fact, this new transparent process was recognized by the Delhi High Court for its fair, transparent and unbiased approach. In the spectrum auctions the government’s approach ensured massive gains, in stark contrast to the zero-loss theory of the past. The complex issue of defense band identification pending since more than seven years was resolved quickly & good quantity of 2100 MHz released by the Defence Ministry was put into the auction. Spectrum in 4 various bands – 800 MHz, 900 MHz, 1800 MHz and 2100 MHz were put into simultaneous and multiple rounds of auction for the first time, so that the operators could take informed decisions. As against the approved reserve price of around INR 80,000 crores, the auction fetched a record INR 1 lakh crores.

This Government has also been proactively engaging with foreign governments, for exchange of information under Double Taxation Avoidance Agreements (DTAAs)/Tax Information Exchange Agreements (TIEAs)/Multilateral Convention on Mutual Administrative Assistance in Tax Matters etc.. The Government has also taken pro-active and effective steps whenever any credible information has been received with regard to black money stashed abroad, whether in more known instances such as HSBC cases, ICIJ cases, Paradise Papers or Panama Papers. These steps include constitution of Multi Agency Group in relevant cases, calling for definitive information from foreign jurisdictions, bringing the black money to tax under relevant law launching prosecutions against the offenders etc. All these steps have now opened up ways through which information on black money stashed abroad has started coming to Indian authorities and many cases are under investigation.

An Information technology based ‘Project Insight’ has recently been launched for strengthening the non-intrusive, information driven approach for improving tax compliance. Further, ‘Operation Clean Money’ is in place for collection, collation and analysis of information on cash transactions. This operation extensively uses information technology and data analytics tools for identification of high-risk cases, expeditious e-verification of suspect cases and enforcement actions in appropriate cases. Finally, the most landmark move the Government announced to tackle black money was- Demonetization. While the move caused some initial pain to common masses, it has effectively ensured that the entire cash that has now come back in the financial system has address of its holder as opposed to the earlier situation when cash was untraceable. Now, the government authorities can crack down on those who had money that were unaccounted for.

Walking the Talk: Impact of anti-corruption initiatives

The quality and quantitative impact of various anti-corruption initiatives taken by the government has been briefly discussed below. The first and possibly the most important change that has come about is that trust and confidence of people in their own government has now been restored. Prime Minister Modi has shown that development can happen in India without corruption and in a completely transparent and ethical manner. This has qualitatively impacted the hearts and minds of people. The fear that it is not okay to engage in old corrupt means has gripped not only those who benefitted from the system in India but also those who actively used international banks for such activities. The data collected by Swiss National Bank in collaboration with Bank for International Settlements (BIS) shows that the loans and deposits of Indians, other than Banks, in the Swiss banks decreased by 34.5% in just one year post demonetization. Further, there has been significant reduction in Swiss non-bank loans and deposits of Indians by 80.2% between 2013 and 2017.

The windows that were opened up for individuals to declare their assets or face corrective action have had huge success. Under the Income Declaration Scheme (IDS) in 2016 and then the Pradhan Mantri Garib Kalyan Yojana (PMGKY) the next year, after demonetization, a total of INR 72,200 crores was disclosed by 92,000 persons earlier not accounted for. Moreover, post demonetization, there has been considerable jump in digital payments which is making the economy cleaner and more formal/accounted for compared to the past. The speech of the Finance Minister in the Budget 2019 further quantifies other tangible and intangible impact of the actions that have been taken by the government in the last 4.5 years. He said – “We have ushered in a new era of transparency. We have given a corruption free government. The Real Estate (Regulation and Development) Act, 2016 (RERA) and Benami Transaction (Prohibition) Act, 1988 are helping to bring transparency in the real estate sector. The Fugitive Economic Offenders Act, 2018 will help confiscate and dispose off the assets of economic offenders who escape the jurisdiction of the laws in India. Additionally, we conducted transparent auction of natural resources including coal and spectrum. We have walked the talk…..The anti-black money measures taken by us during the last four and half years in the form of Black Money Law, the Fugitive Criminal Offenders Act, and Demonetisation, have brought undisclosed income of about Rs. 1,30,000 crore to tax, led to seizure and attachment of assets worth approximately ` 50,000 crore, and compelled holders of large cash currency to disclose their source of earnings. During this period, Benami assets worth ` 6,900 crore and foreign assets worth `1,600 crore have been attached. As many as 3,38,000 shell companies have been detected and de-registered, and their directors disqualified. Growth of 18% in direct tax collection in 2017-18 and increase in tax base by as many as 1.06 crore people filing income tax returns for the first time in FY 2017-18 is mainly on account of demonetization.

Under the DBT, more than INR 6 lakh crores have been transferred to the poor and common citizens. 437 government schemes across 55 ministries are now under DBT and leakages worth more than INR 1 lakh crore have been eliminated. 4.09 crore duplicate, fake/ non-existent, inactive LPG connections eliminated. 2.82 crore duplicate and fake/ non-existent Ration Cards have been deleted and nearly 10% savings have been achieved in the MNREGS scheme on account of deletion of duplicate, fake/ non-existent, ineligible beneficiaries.

All these measures have indeed increased India’s speed to tackle corruption at all levels. But this doesn’t mean that the problem has been solved. The legacy of decades can’t be completely changed in 4.5 years. More still needs to be done. To lead towards a future free of corruption of any form, what is needed is to continue and further build upon the foundation that has been laid by the PM.

Kishore Desai is Officer on Special Duty (OSD) with the Economic Advisory Council to the Prime Minister (EAC-PM). All views expressed are personal.

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