A year after demonetisation, hunt for black money getting more intense
- Starting this week, the I-T department will start dispatching notices under the I-T Act to nearly 70,000 entities.
- Also under scrutiny are around 22,000 tax returns filed by those who did not file their returns before note ban.
- With over 99% of scrapped notes back in the system, questions arose whether the exercise flushed out black money at all.
Prime Minister Narendra Modi's announcement of demonetisation on November 8 last year reminded people of the Emergency declared by then prime minister Indira Gandhi in 1975. The sudden move reflected the brute power of the state, which had lost its aura during the previous regime of the UPA II due to internal bickering, power plays, rivalries and policy paralysis.
Behind the dramatic impact of Modi's shocking announcement was a long, carefully planned, secret operation that no one in the government, media or the RBI got a whiff of—except a chosen few, may be not more than two dozen people.
Why secrecy?
If the details of demonetisation had leaked, its purpose would have been defeated. Those on target would have hidden their cash in land, jewellery, etc. Though most of them eventually did find a way of saving their black money by depositing it in other accounts in smaller quantities to escape scrutiny. To make it effective, demonetisation needed to be planned secretly right till the announcement by Modi on November 8. And that's what actually happened. Secrecy around demonetisation also helped Modi project himself as a ruler who had total control over his government unlike previous regimes often undermined by unruly allies, obdurate bureaucrats and conspiring ministers.
Modi's home team
Modi had seemed to have made up his mind around April 2016 to demonetise high-currency notes, according to reports that appeared later about the secret operation, which means the operation had started in right earnest by then and went on for eight months — a long time to keep such a big plan secret. Yet Modi found a way to do that.
The secret preparatory operation was run from the two rooms of Modi's 7 Race Course Road residence by a team of committed researchers many of whom were too young to have ever worked on a ground-breaking government policy. These young experts in data and financial analysis had also run Modi's social media accounts and his smartphone app that he used to solicit public feedback, according to a Reuters report. The relative lack of connections of the youths among the powerful, their personal commitment to Modi and their location right under Modi's nose helped keep the operation secret.
The prime minister's man
Then revenue secretary Hasmukh Adhiya was the man heading the secret operation. He was Modi's most trusted man in the government as Adhiya had been Modi's principal secretary when he was the Gujarat chief minister. Modi had hand-picked his former principal secretary for the job of revenue secretary less than a year ago. Adhiya was an outsider in India's financial circles. He oversaw the work of Modi's home team of young researchers. Though he reported to Finance Minister Arun Jaitley, he had a direct line to Modi. Familiar with each other, they talked in Gujarati. RBI Governor Urijit Patel, Secretary of Economic Affairs Shaktikanta Das and Secretary of Investments & Currency Dr Saurabh Garg were other senior people in the government who were part of the secret project.
Keeping a secret in open discussions
Later reports revealed that Modi had openly sought views from several quarters, including RBI officials, on demonetisation. Yet, no one could gather such a plan was being put in action. The reason? A clever ploy devised by Modi's team that never sought opinion from experts on the whole plan but on different parts of it. By breaking discussions down into small parts, the whole plan was kept a secret. It needed an unusually imaginative mind to piece together the plan. And since Modi had come to acquire the image of a reluctant reformer, no one would have expected such a shock move from him.
When the whiff came out
The rumours about a new Rs 2,000 currency note had started doing the rounds well before Modi's announcement. According to reports, the government had to declare demonetisation earlier than planned because it was afraid the word would come out.
The day of demonetisation
The move was planned so secretly that neither most of the bureaucrats nor even Modi's own ministers knew about it. It is said even the party president Amit Shah got to know of it from Modi's address, and Jaitley was briefed in the cabinet meeting a few hours before the address.
The day before the announcement, the heads of the currency management sections of all banks received a confidential communication from the RBI, asking them to be present at the headquarters on November 8. They had been called to receive currency chests. They were under strict instructions not to open the chest or speak about it until they received a signal from the RBI. The bank officials got the signal to open the currency chest only after Modi's announcement. They had been told the chests contained new Rs 2,000 notes. But when they opened it, they found new Rs 500 notes too.
Similarly, the minister were also kept in the dark about the move. Modi called a cabinet meet to brief the ministers about the decision right before his televised address on November 8. Well before that, the PMO had directed ministers not to bring cellphones to cabinet meetings.
The official agenda of the meeting was quite deceptive—a string of MoUs between India and Japan. The secrecy did not end at just that. After the cabinet meeting in which Modi briefed the ministers, he went to meet the then president Pranab Mukherjee to inform him about the decision. But all the ministers had to remain within the meeting hall from 6:45 PM to 9 PM when Modi's televised address began. Modi wanted to shock the nation. Any leaks, even on the same day, would have diluted the shock.
What the project told about Modi
With this secret operation, Modi proved that he had got complete hold of the government which used to leak like a sieve during the UPA rule. He also sent the message to his colleagues in the cabinet that he is the sole repository of the government power, not vulnerable to their power plays, unlike the previous PM Manmohan Singh. The secrecy also put a stamp on Modi's capacity to work the levers of the government like an expert manager who, undeterred by an unyielding bureaucracy, could make things move as he desired. It was the secrecy that gave his critics the reason to call him an autocrat who could bypass the institutions and processes even when it came to such an important decision. Demonetisation projected Modi as another Indira Gandhi—a strong leader who could impose his will on the government.
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