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Understanding Black Money: Why Jaitley needs to do more

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By Harshmeet Singh

The awakening of society towards the issue of black money can be credited as much to the media as to the innumerable agitations over the past 5 years.

After a long wait, tough talking Arun Jaitley has finally announced some stringent laws to deal with the offenders of the Foreign Exchange Management Act. According to the proposed law, a rigorous imprisonment of up to 10 years along with a 300% tax penalty will be awarded to those failing to disclose foreign assets.

Apart from proposing severe consequences for the offenders, the FM also stated that the Government was in the process of devising a plan to encourage voluntary disclosure by allowing people to repatriate their black money by paying the appropriate taxes.

Albeit experts and agencies differ in their estimation of the total Black money stashed in foreign banks by the Indian residents, all of them peg the amount to be a significant proportion of our GDP.

black money

How Black Money originates

Contrary to the common belief, Switzerland is fast losing its position as the ‘favourite’ destination for India’s Black money. With all eyes on the Swiss Banks, the depositors are now eyeing safer destinations. A number of individuals have resorted to round tripping to convert their unaccounted money. Round tripping essentially refers to Indian money going abroad by illegal routes, such as Hawala and then coming back to the country in the form of investments or remittances. Tax havens such as Mauritius have attracted huge funds over the past decade, owing to Round Tripping. While it may seem like an easier route to bring back the black money, the evasion of tax at the first instance causes huge losses to the exchequer.

GMR, Reliance Communication also round trip

Surprisingly, a number of listed companies have also come in the net of allegations of round tripping, with SEBI issuing notices to Reliance Communication, GMR and United Spirits.

Circulating money via Villages

Even though the phrases ‘black money’ and ‘stashed abroad’ are usually taken in a single breath, the amount of black money circulating within the borders of the country can’t be underestimated. One of the most common, yet unnoticed ways of circulating black money is through private money lenders in villages. With nationwide financial inclusion still a far off realization, the unbanked villages in India number more than 4 lakh. Lack of credit facilities forces the farmers to take loans from local moneylenders at exorbitant interest rates of 25% – 30%. Such mechanisms provide a fertile base for the black money holders to circulate their illegal or unaccounted cash without raising anyone’s eyebrows.

The Government, by its own admission, is trying its best to bring all the black money holders to the fore. One hopes that probes in matters such as HSBC leak list don’t take the ‘eternal’ path and are fast tracked to keep pace with the big promises made.

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Why JDU & BJP Coalition Will Remain Intact

JDU knows that this 15-16% votes is not enough to help the party and for the BJP too, only the 17% votes of upper castes are not sufficient

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Nitish Kumar with Narendra Modi.
Nitish Kumar with Narendra Modi.

By Sagarneel Sinha

There have been lots of discussions among the political circles that JDU led by Bihar Chief
Minister Nitish Kumar is upset with the BJP and trying to send signals to erst allies — RJD and the Congress. This led to speculations that Nitish may once again join the Grand Alliance (GA) leaving the NDA camp. Already, RJD’s new commander Tejasvi Yadav has clearly stated that Nitish led JDU will not be welcomed in the GA. Despite all the odds, if (suppose) GA partners accommodate Nitish, he wouldn’t be the driving force of the alliance as in 2015. Also, Nitish cannot afford to go alone like in 2014 when his party fetched only 2 seats!

Then which is the correct way for JDU? It is to go with the BJP in the upcoming 2019 polls.
JDU’s advantage in this case is the present situation of the BJP. Currently, the saffron party is not in a strong position as the party would be facing anti-incumbency from a strong RJD led alliance in the state. BJP’s traditional voters are the upper castes who account for 17% of the electorate. This votebank is not enough for the party to help to win elections. The main opposition party — RJD still commands over a larger votebank than BJP. RJD is still a dominant force among the Yadavs and the Muslims who account for 31% of the population. It means BJP has to minus the 31% votes and rely on the rest — 69%. Out of these, 16% are the Mahadalits — a large portion of whom generally hail Nitish Kumar as their leader. Also, there are Kurmis, an OBC group consisting of 4% votes — considered as the supporters of JDU. Nitish Kumar himself is also a Kurmi.

Nitish Kumar Invited to Join NDA by Amit Shah After JDU-BJP Tie-up in Bihar
Nitish Kumar Invited to Join NDA by Amit Shah After JDU-BJP Tie-up in Bihar.

JDU knows that this 15-16% votes is not enough to help the party and for the BJP too, only the 17% votes of upper castes are not sufficient. However, if these votebanks are joined together they form around 31-32%. Plus, to gain the extra votes, both the parties have the option to rely on the personal charisma of Nitish Kumar and Prime Minister Narendra Modi. However, there is a power tussle between the two allies to get a respectable share of seats.

This power tussle is because of a strong BJP which earlier used to be a junior ally. The 2014 Lok Sabha elections changed the political scenario of the state where BJP emerged as the largest party in terms of vote share and seats. JDU knows the reality of a new emerging BJP, though it is pushing hard to gain a respectable share of seats for the Lok Sabha elections. Instead, Nitish Kumar has another option — giving the bigger chunk to the BJP for the Lok Sabha elections and the latter playing the junior partner for the 2020 assembly elections if held timely. Given the current situation in the country, in a crucial state like Bihar, BJP can hardly reject JDU as the later still commands over 15-16% votes — a very crucial votebank for winning maximum seats in the 2019 polls. Importance of JDU can also be explained by BJP president Amit Shah’s visit to Patna to have breakfast and dinner with Nitish Kumar. Though in politics there are no permanent friends or foes, so any perfect prediction is impossible. But given the current situation, JDU and BJP parting their ways seems unlikely as both the parties are in need of each other as already highlighted by Amit Shah that the two allies would fight the Lok Sabha elections together. Smiling face of Nitish Kumar was also an indication that the meetings with Amit Shah were fine.