Saturday, March 24, 2012

Ending Corruption in India

I have no doubts about the intelligence of Indians and the fact that the vast majority of us are against corruption and interested in the nation's growth and prosperity. However, despite all the attempts being made by the Citizens and the various political parties in the country, I read a lot of gibberish & see no major ideas coming forth that could vanquish Corruption & Black Money from India in a short period of time.

May I suggest 3 simple measures that, if implemented, would bear results in no time?

‎#1. Give the nation 5 days to deposit all currency notes in denominations of Rs.500 & Rs.1,000 in Banks, prior to demonetizing these notes. Banks would be required to issue Debit Cards of equivalent value against the deposits received to the respective depositers. PAN Nos. of all depositers must be taken prior to issue of Debit Cards, and those without PAN Nos. should go through the UID process viz. biometrics, photographs, residence proof etc. prior to being given a claim on the funds deposited by them. The list of all deposits and depositers (with PAN Nos.) must be furnished by the Banks to the RBI (Reserve Bank of India) and the Income Tax Deptartment. Thereafter, no currency note of a denomination exceeding Rs.100 should be put back in circulation, as all transactions involving higher amounts would be through Debit/Credit Cards only and through Banking Channels.

Result: End of Black Money, Inflation & Counterfeit Currency in one stroke; while GDP & Tax collections would shoot up.

‎#2. Any payments made in excess of Rs.1000 in Cash should be subject to TDS & must be accompanied by the PAN No. of person/party receiving the money. Issuance of a Cash Receipt should be made mandatory and in case such a receipt is not furnished, it should be considered a Crime & made punishable under the provisions of the IPC (Indian Penal Code).

Result: End of bribes & corruption.

#3. A last chance be given to any resident Indian with deposits in overseas accounts (largely Swiss Banks with an estimated US$1.5 trillion of deposits from Indians) to bring back the funds to India through a Special Amnesty Scheme whereby all the Funds would go into "Zero Coupon 10 Year Infrastructure Bonds" failing which all deposits/depositers would be investigated & imprisoned (if & when proven guilty) apart from such funds being seized. Upon maturity i.e. after 10 years, such amounts would be returned in Indian Rupees at the US$:INR parity prevailing then. This could take RBI's Forex Reserves up to US$1.8 trillion from the US$ 290 billion currently, thereby affecting the exchange rate of the Indian Rupee. I suspect that the US$ after 10 years may not be worth more than Rs.20 (hence, the Government would borrow at a current exchange rate of around Rs.50 to a US$, but, redeem close to Rs.20 to a US$), as with these funds & infrastructure in place India could record GDP Growth in excess of 15% per annum consistently, and become the second largest (if not the largest) economy in the world by the next decade.

Result: Huge build up of infrastructure at a very low cost & consistently high GDP growth accompanied by the strengthening of the INR and bridging our balance of trade position.


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