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Sunday, March 18, 2018

The fight against corruption threatens India’s social catastrophe

On Sunday Prime Minister of India has finally addressed that from it waited a week. His tone broke from accusatory to appealing. In order to combat corruption and promotion of electronic money, the government has withdrawn from circulation a number of bills – and for the province that turned out to be a disaster with suicide and incitement to riot.

Due to the established PR, Chinese methods of dealing with corruption at the hearing of the whole world: there and shootings and huge prison terms, and confiscation of property. Much less attention is paid to India, while Prime Minister Narendra modi is fighting against corruption for the past two and a half years, applying the measures and the traditional, and rather eccentric. The result is obvious: during the authority India modi has risen in the ranking of the least corrupt countries with 100 in 76th place. The Prime Minister, however, believes that early to rejoice and bribery remains “rotting wound, eroding the country from within”.

“I know what forces I have attempted. I know people who will be against me now. I take care of what they have amassed for over 70 years”

Special attention is paid in tax collection. Modi has already pushed through Parliament a law providing a ten-year prison sentence for evasion thereof. In September came to an end a period of tax Amnesty during which managed to legalize 650 billion rupees, or about 620 billion rubles.

A week ago the Prime Minister went on truly shocks reform. Citizens has announced that from circulation immediately withdrawn currency notes in denomination of 1000 and 500 rupees. Some time they will take only gas stations and some stores with government license. In addition, these bills will be to buy a train ticket or plane. And the bills that still remain in Indian hands, have until the end of 2016 to put in a Bank account, or exchange at the new nominal value of 2000 and 500 rupees. While at one time can be exchanged not more than 4,000 rupees, and the need to present ID and to fill out the questionnaire. But if the accumulation exceeds 250 thousand rupees, will have to explain their origin tax and in case of serious issues to pay 30% penalty of the amount.

Something similar reform not long ago devised in the European Union, announced the cancellation of banknotes of 500 euros. The specifics of the Indian exchange, however, is that banknotes in 1000 and 500 rupees quite cheap – a little less than 1000 and 500 rubles, respectively. As in major cities of India. the price level is quite comparable with Moscow, it is easy to imagine what kind of trouble the Indians brought this “shock therapy”. With the environment the population is in queues to ATMs. Small bills are almost never left, so very temperamental citizens these ATM machines sometimes break. In parallel, the crowd stormed a Bank branch, where you can change large notes into notes of 100 rupees or the new notes RS 2000. However, with the new large bills in shops too there is nothing: the supply of small change banknotes everywhere has dried up, and sellers banal can not give change. To gas stations also attracted huge queues.

Social network India literally exploded from the shockwaves of indignation. At the same time, many citizens (especially educated) approve of the policy of the government. The problem of “black money” for the Indian economy. According to the estimates of IMF experts, the shadow cash flows are not less than 20% of India’s GDP, that is about 30 trillion rupiah. Excess of black money provokes a rise in prices and rise to inflation, fuelling criminals and terrorists. Realizing these threats, the urban population of patiently going through the inconvenience and expresses its willingness to make frequent use of Bank accounts and plastic cards.

Another thing is that for citizens monetary reform turned out to be more or less tolerant. In rural areas, where two-thirds of a billion-dollar country, a ban on the circulation of banknotes turned into a tragedy. The fact that banks are simply unable to cover all inhabited areas of the vast country. In many places the inhabitants never used no plastic cards, no ATMs. From the nearest Bank branch they are separated by tens of kilometers. Besides, illiterate peasants could not open your Bank account, read the contract and sign it. Here, as in the old days, millions of people pay in cash, and hoarding it for a rainy day. Selling harvest, home, or land can bring the farmer millions of rupees, which he keeps in the pod. The same happens with saving for a wedding, which the Indian farmer is a major event in the life and major costs. Now all these masses of cash worthless in a moment. A few days ago killed himself a resident of the state of Telangana who sold his land for 5.6 million rupees in cash.

The Prime Minister of the state of West Bengal (third income region of India, with a population of 91 million people) mamata Banerjee has demanded of the government to abolish the “draconian measure”. In her opinion, it is a “heartless attack on ordinary people, private entrepreneurs and the middle class under the guise of fighting corruption.”

Indeed, operators of large amounts of black money, corrupt officials and leaders of the criminal world prefer to invest in gold, real estate and Antiques, and the money is stored not in rupees, but offshore. However, the government has successes in this area. For example, in Switzerland the total number of Indian contributions in the last 15 years has decreased markedly, and India dropped from 37 to 75-th in the ranking of countries with the most large cash reserves, derived abroad. And yet Indians are collectively stored in Switzerland in the order of $ 1 trillion, hundreds of billions were distributed in other offshore and a significant portion went to Mauritius.

“I know what forces I have attempted. I know people who will be against me now. I take care of what they have acquired for more than 70 years (since India’s independence – approx. OPINION). They will not allow me to live. They will destroy me. Let them do what they want. But can you help me for 50 days. The country should just help me for 50 days,” modi appealed to their fellow citizens. “Didn’t you ask me to deal with black money? If you asked me to do this, should I do this or not? Tell me, if you asked me, then, you have represented that there will be some inconvenience,” he literally begged. These words were his first public appearance since the controversial reform.

However, he promised to continue the fight against corruption: “This is not the end. That’s not the point. I tell you openly, that’s not the point. I have ideas of several other projects, how to stop fraud and corruption in the country. These projects are being prepared”.

Corruption is a systemic problem of India since the time of colonization. Every year Indians spend on bribes of about 6 trillion rupees. But monetary reform proposed modi, allows to fight against bribery only in the lower, domestic levels. It will create the problem of dishonest police, judges, doctors, officials. Politicians and Ministers, regularly ranked in the billions of dollars of fraud with the earth, energy, licenses and military procurement, it does not threaten.

Now Narendra modi is trying to create an atmosphere of total public intolerance to bribery. The majority of the population who bothered to pay for any stuff like getting a driver’s license or officially free medical care, are ready to support even the most exotic of his actions. However, the likelihood is high that a shock-reform Prime Minister will suffer the fate of exactly the same monetary exchange, which the government of India started in 1978. Then out of circulation, it was decided to withdraw the “bribe money” – banknotes of 5000 and RS. 10000. Corruption is not affected from the word “rubbish”, but economic growth slowed for a long time.


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