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HomeFresh TakeWhy demonetisation is not a war on black money

Why demonetisation is not a war on black money

Political Parties

By Nishank Varshney

On 8th November 2016, Prime Minister Narendra Modi announced a sudden cancellation of 500 and 1000 Rupee notes with a view of ‘eliminating black money’. He has since regularly reiterated this stand, calling demonetisation a “war on black money” through his speeches and his “Mann ki Baat” program. However, Mr Nasim Zaidi, the Chief Election Commissioner(CEC) of India, expressed that “many political parties are being used as conduits for syphoning off black money”.

Who has the policy of demonetisation actually benefitted?

According to the RP Act, 1951, political parties are not legally bound to declare the names of donors below 20,000 rupees. They are permitted to collect infinite such donations, speculated an article last month.

Existing political parties are using this loophole post demonetisation to successfully convert unaccounted money into white without fearing penalties.

Examining the truth behind this, ABP News carried an investigative report where they traced many political parties at their registered address. It was found that many parties in the NCR existed only ‘on-paper’.

Political Parties

Political parties enjoy the relief of not disclosing names of contributors who donate less than Rs. 20,000. | Source: Top News Today

A study by Association for Democratic Reforms (ADR) has shown that ‘unaccounted donations’ form a large part of political parties’ income. In the year 2014-15, BJP declared an income of 505.26 Crore, while Congress received a sum of 445.22 Crore from ‘unknown sources’. Mr Zaidi voiced concerns that many of the 1700 odd political parties present in India might be misusing this exception.

Is the government playing blind to the obvious?

The revenue secretary Mr Hasmukh Adhia,  made an uproaring statement about political parties being exempted for deposits made into their own accounts. Mr Arun Jaitley was quick in stating that no exemptions had been given to political parties ‘after’ demonetisation. He ignored the fact that they have been enjoying these exemptions from ‘before’. He also said that “under the IT Act, political parties have to submit audited accounts, income & expenditure details and balance sheets.” While it is true that political parties are required to get their accounts audited, they are not required to disclose the details of donors giving less than 20,000 rupees to EC or IT Department. This is evident from the Audit Report of BSP for 2013-14.

The status of income and expenditure of remaining 1620 parties remains largely unknown.

Another analysis by ADR reveals that out of 1703 registered political parties in 2013-14, 69 submitted donation reports, while only 14 submitted their audit reports to EC. The status of income and expenditure of remaining 1620 parties remains largely unknown. Thus, if 95% of political parties can go unquestioned about their finances, can demonetisation really be called a “war against black money”?

An Enforcement Directorate probe revealed BSP’s deposit of 105 Crores into their party account in the demonetised denominations. BSP’s supremo Mayawati explained that they received this amount in small donations from all over India since August 2016, making it legal.

PM’s need to ‘walk the talk’

Recently Mr Modi proclaimed that the laws regulating the funding of political parties were made by the Congress and his government has “not altered even a comma or a full stop in that.” Despite warnings by the CEC, the PM has not made any effort to change the rules which are helping the political parties to syphon off black money.

When Mr Modi is urging the whole country to go cashless, why is he not mandating the BJP and other political parties to go cashless?

Why is the government not showing any intent to curb black money by amending the RP Act or bringing an ordinance to remove the 20,000 rupees limit?

Demonetisation cannot be called a “war on black money” unless the laws aiding these political parties are amended.


Nishank Varshney is a Public Policy scholar at the Humphrey School of Public Affairs, University of Minnesota. He has previously worked on Electoral Reforms with the Association for Democratic Reforms.
Featured Image Courtesy: Hindustan Times
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