Talking Point: Slash discretionary powers of officials to tackle corruption

“Demonetisation is the only step. The government should also make it a crime to hold liquid cash of Rs 10 lakh and above. Today, it is not a crime. Why should an individual hold huge cash?” he said. Lowering the tax rate to expand the taxpayers’ base and tax revenue and moving towards smaller denomination notes are some other steps to curb corruption, says Vaidyanathan, who teaches finance at the premier management institution. 

According to estimates, five per cent of the Indian Gross Domestic Product (GDP) every year is black economy. Around Rs 600,000 crore of parallel economy is not small, he said. Vaidyanathan said he had been advocating demonetisation of Rs 500 and Rs 1,000 value currency notes, which the government did on November 8 night. “I have been telling this (demonetisation) since 2012. I watched the electoral politics of Tamil Nadu and Andhra Pradesh. A significant amount of money was seized there by the Election Commission. In the last assembly elections in May, around Rs 100 crore was seized by the Election Commission in Tamil Nadu,” he said. 

“Most of the seizure was in Rs 100 and Rs 500 notes. Further, the proportion of Rs 500 notes in circulation was on the rise,” Vaidyanathan recalled. Out of Rs 17 lakh crore currency in circulation, notes of Rs 500 and Rs 1,000 account for around Rs 14 lakh crore. On bringing back cash stashed abroad and not meeting expectations on black money recovery, Vaidyanathan said: “Such efforts need proper planning. Bringing back black money is not like cooking two-minute noodles.” 

The nation incurs additional expenditure on printing new notes to meet the demand as individuals hoard the ill-gotten cash. The government regulations had become an instrument of extortion. So, the “judicial process should also be swift and fast to instil fear of rule in the minds of people,” he adds.