An average middle-class or lower middle-class person’s life in India often sees instances of routine petty compromises, especially with rent-seeking entities. Considering there are millions of such people in India, we can be certain that most them have faced people who seek bribes or favours in return for a service.
For example, the sheer number of people, a local kirana store owner, a transport service owner, a trucking depot owner would have to ‘take care of’ in order to ensure smooth functioning of their business was bewildering. However, this practice bit the dust when the government decided to end this ordinary way of life by introducing Goods and Services Tax (GST). GST brought technology and transparency to taxation.
In short, the way to ensure a cleaner system is to follow a two-pronged strategy – crack down against avenues of corruption and black money, and, take measures to boost transparency.
Corruption undermines government revenue and limits the ability of the government to invest in productivity-enhancing areas. Corruption sabotages the trust between the tax payer and the tax collector.
The Narendra Modi government is completing its four years. The biggest challenge for the current government when it came to power was to weed out this menace from the system, tackle the repercussions of scams from the previous government.
The True Picture looks down the memory lane and lists down important steps taken by the government in its fight against black money and corruption.
Legislations and Amendments to fight Corruption
Constitution of SIT
The government made its intentions crystal clear in the very first cabinet meeting when it constituted a SIT, headed by retired Supreme Court judge, Justice MB Shah to unearth black money. In its interim report, the SIT made several recommendations, many of which have been accepted by government.
Income Declaration Scheme, 2016
The scheme was introduced by the government as part of the Union budget 2016. Lasting from 1 June to 30 September, the scheme provided an opportunity to income tax and wealth tax defaulters to avoid litigation and become compliant by declaring their assets, paying the tax on them and a penalty of 45% thereafter.
The government was complimented for the success of the scheme. Finance Minister Arun Jaitley reportedly announced in October 2015 that nearly Rs. 60,000 crores of black money was declared. There has been independent praise for it too. An article in The Economic Times says:
“IDS was executed with the backing of the prime minister and with the entire tax machinery moving in unison relentlessly. Clarifications were provided quickly, fears of leakages were assuaged, online filing facilities provided, and an atmosphere was created that showed seriousness of the purpose. Perhaps, there is a lesson here: that the government needs fewer schemes and initiatives and must focus more on execution of key schemes in a structured manner.
The fact that there is an increased transparency in government action, there is reduction in corruption (more so at the higher echelons) and the government is walking the talk demonstrates that unaccounted monies will have reduced relevance.”
Benami Property Act
The Benami property act that was lying cold storage for decades without getting notified, was implemented to crack down against the generation and holding of black money in Benami properties. People used to hoard black money in Benami property while taking advantage of loopholes in the law.
In January 2018, the Finance Ministry said:
“..provisional attachment has been made in more than 900 cases of properties under the Prohibition of Benami Property Transactions Act (the ‘Benami Act’), which came into force w.e.f 1st November, 2016. These attachments include plots of land, flats, shops, jewellery, vehicles, deposits in bank accounts, fixed deposits etc. The value of properties under attachment is more than Rs. 3,500 crore including immovable properties of more than Rs. 2,900 crore.”
November 2016 stood witness to the one of the biggest blows to the hoarders of black money across the country. The obvious disruption aside, demonetisation forced unaccounted-for money to flow into the banking sector, which can and is being tracked.
Acting against shell companies, Government cancelled registration of 2.24 lakh companies. The shell companies were suspected of money laundering activities. Post-demonetisation it was noticed that 58,000 bank accounts owned by 35,000 shell companies deposited and withdrew Rs 17,000 crores.
Demonetisation was a huge blow at black money hoarders.
Within about a year of demonetisation:
- There were 17.73 lakh identified suspicious cases where deposits did not match the depositor tax profiles.
- Banks and Financial Institutions have reported an additional 4.7 lakh cases of suspicious transactions.
- Officials unearthed undisclosed income worth Rs 29,213 crores.
- Rs 16,000 crore of the demonetised currency never came back to the banks rendering the amount illegal.
Reportedly, Between 9th November 2016 to 10th January 2017, more than 1100 searches and surveys were conducted by the Income Tax Department, this excludes issuing more than 5100 verification notices in the cases of suspicious high value cash deposits or related activities. This led to seizure of valuables worth more than Rs. 610 crore including cash of Rs. 513 crores. Cash seized in new currency notes was worth about Rs 110 crore. The undisclosed income detected in these actions was more than Rs. 5400 crores.
Operation Clean Money
Income Tax Department started Operation Clean Money on 31st January 2017 to analyse the data of persons who deposited large sums of cash and whose income returns were not in sync with such deposits during demonetization period i.e. 9th November to 30th December 2016. The operation was carried out in two phases:
- 73 lakh suspect caseswere identified through use of data analytics where cash transactions did not match the tax profile of the depositors.
- These involved Rs. 3.68 lakh crore in 23.22 lakh bank accounts.
- 20,572 Income Tax Returns (ITRs) were selected for deeper scrutiny.
- 1,16,262 notices were issued to non-filers who deposited Rs 25 lakh or more in cash during demonetization but failed to file their return of income by the due date.
Insolvency and Bankruptcy Code
Crony capitalism is an insidious kind of corruption that compromises institutions, weakens the economy and extracts a price from taxpayers and depositors of banks. The time bound resolution for corporate insolvency was the first step towards ending this. The Insolvency and Bankruptcy Code Bill was introduced in November 2015. The bill was passed by the Parliament in May 2016 and it came into effect from December 2016 onward.
IBC’s objective is to consolidate and amend laws pertaining insolvency resolution of corporates and individuals in a time bound manner. It aims for maximisation of value of assets, promote robust capitalism which doesn’t drain the economic resources of the nation.
The first of its success stories came out recently on May 18, 2018, when Bamnipal Steel, a Tata Steel subsidiary, acquired a controlling stake of 72.65% of Bhushan Steel for Rs 35,200 crore. The important benefit of this deal was that banks will recover Rs 35,200 crore immediately, which covers most of the principal amount that Bhushan Steel owed to its lenders.
Recently, it was also reported that the apprehension of losing their companies made 2,100 companies repay bank loans worth Rs 83,000 crore.
Fugitive Economic Offenders Bill, 2018
The Modi Government brought in the Fugitive Economic Offenders Bill, 2018. It seeks to act against economic offenders from evading the process of Indian law. It provides the government powers to confiscate properties of fugitive economic offenders. This is a direct deterrent to those involved in scams and frauds who evade the law. The bill will help banks and other financial institutions to achieve higher recovery from fugitive economic offenders.
Abolition of Interviews for non-gazetted jobs
As part of efforts to put an end to the avenues of corruption, PM Narendra Modi declared that from January 1, 2016, there will be no requirement of interview for Group D, C and B non-gazetted posts in central government.
Steps Taken to Boost Transparency
Transparent Coal Block Allocations
The erstwhile UPA government allocated coal blocks in a dubious manner and this came under the scrutiny of courts. As a result of the scam, Supreme Court held the 214 allocations illegal.
The NDA government in 2015 brought in the Coal Mines (Special Provisions) Act, 2015 with the objective to empower the government to allocate the coal mines on the basis of competitive bidding to ensure continuity in coal mining operations and promote optimum utilisation of coal resources.
The act brings in the absolutely essential transparency in the bidding process and thereby eradicating any chances for discretionary powers that can indulge in favouritism and corruption. This brought a windfall of at least Rs 3.94 lakh crores for the nation.
Keeping its promise made in 2014 election manifesto “digitisation of all government work to reduce corruption and delays”, the government launched the Government e-Marketplace portal on 9th August 2016. GeM aims to improve transparency and speed up efficiency in public procurement. It is completely paperless, cashless and system driven. It enables procurement of common use goods and services with minimal human interface. Reportedly, as per the latest data available over 22,000 buying organisations have placed orders worth over Rs 7,000 crore.
Encouraging ‘Less-Cash’ Economy
Demonetisation gave the much-needed push to citizens to adopt digital transactions as their preferred mode of payment. 50 lakh new bank accounts were opened to enable cashless transaction of wages.
PM Modi launched BHIM app based on UPI to facilitate the drive towards cashless transactions. As of 31 March 2018, BHIM App has been downloaded over 2.64 crore times. 89 banks are live on BHIM app and can be used by citizens for transactions.
Direct Benefit Transfer
Cutting down on the involvement of middlemen the government reformed the delivery system for faster flow of information/funds. DBT ensures better targeting of the beneficiaries and reduces frauds and leakages.
Union Ministry of Petroleum and Natural Gas’ programme PAHAL is world’s largest cash transfer programme with over 20.14 crore beneficiaries receiving 69,815 crore rupees till date.
The reach of DBT has increased manifold under the current administration with it covering 431 schemes as compared to only 7 schemes back in 2013. In last 4 years over Rs 3,65,996 crore has been directly transferred into the back accounts of the beneficiaries of these 431 schemes.