modi's failed war on 'black money

Modi’s failed war on “Black Money”.

05/01/23Mohan Guruswamy

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What is “Black Money”?

1. Money earned by illegal ways – crimes like smuggling, theft, dacoity, drug rackets etc. Corruption.

2. Money earned by legitimate means but on which taxes due are not paid by under-declaration, evasion and concealment.

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How big is the “black” economy?

The previous NIPFP official study commissioned by the government in 1985 estimated it be equal to about 21% of the GDP in 1984 or Rs. 36418 crores out of a then GDP of Rs. 173,420 crores.

In 2014 India’s GDP is estimated to be over $ 2.047 trillion ($1=INR67) or about Rs.100L crores.

In 2014 the Government of India was expecting to collect

taxes and duties amounting to Rs. 13.64 lakh crores.

This only means it is not collecting additional taxes and duties amounting to about 75% of this, other words about Rs. 10.4 lakh crores. This is huge sum and any government will drown in salivation thinking about all the good it can do with that money.


Kitne the’ wo?

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How much money is out there?

As of March 2016, the total value of notes in circulation was Rs. 16.42 lakh crore, of which around Rs. 14.2 lakh crore (86%) was in form of Rs. 500 and Rs. 1000 notes.

The Rs.1000 and Rs.500 notes account for 7% and 17.4% respectively of the currency in circulation.

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Counterfeit money

In 2015-16 of the counterfeits detected, only 415 were in 500’s, 35% in 100’s and the rest in 1000’s.

Of the 9026 crores Indian currency notes in circulation in 2015-16 , no more than 63 lakhs– that is 0.0006% were detected as fake, according to the RBI.

The value of these fake notes in 2015-16 was Rs 29.64 crores, which is 0.0018% of the Rs 16.41 lakh crores currency in circulation.

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Round tripping back to India.


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How is black income kept?


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1. Land & buildings 46%

2. Gold & jewellery 26%

3. Foreign holdings 24%

4. Cash 4%

How many are affected by note withdrawal?

India has a work force of close to 450 million. Of these only 7% are in the organized sector. Out of these 31 million about 24 million are employed by the state or state owned enterprises, the rest being in private sector employment.

Of this vast reservoir of over 415 million employed in the unorganized sector about half are engaged in the farm sector, another 10% each in construction, small-scale manufacture and retail.

These are mostly daily wageworkers and mostly earning less than the officially decreed minimum wages. Thus, a good part of this so-called “black money” held in Rs.500 and Rs.1000 notes the government has choked off is actually money in flow.

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Average daily wages.

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What is the cost of this Modiness? -1


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A Rs.100 note normally has a life of 1000 uses or transactions before it has to be destroyed. The loss is the cost of printing a new note.

If the same number of transactions were by credit or debit card, or by systems like PayTm etc there will be service charges@ 2.5% for each transaction. Most of this money will go abroad.

So the cost of 1000 transactions will be Rs.12,500.Then add the cost of internet and mobile phone charges

@ 20 p per transaction. Add another Rs.2000. AAdd to this the cost of lakhs of new terminals each year,

imported from China.

What is the cost of this Modiness? - 2


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At least 2% loss of GDP.In money terms this would be over Rs.2 lakh crores.At least 22 crores daily workers have suffered loss

of jobs.Biggest sectors hit are farm and construction labor

who have each lost 3-4 crores job losses.Tens of lakhs of small farmers, particularly

vegetable and fruit growers have lost crops due to fall in demand.

About 2 crores small retailers have suffered huge losses

The Cost of New Money.


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What has Modi realized?

Out of the Rs. 14.50L crores in high value notes Rs.13.12L crores have been deposited in banks.

The Modi government was expecting to realize between Rs.4 to 5L crores as un-deposited funds. This is not happening.

Rs.2000 notes in large quantities have been seized from several cities.

Even terrorists in Kashmir have been killed with new Rs.2000 notes.

Modiji ka sundar sapna beet gaya!

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Mohan Guruswamy

modi's failed war on 'black money

Economy & Finance