The Big Reverse
Page 22
3.IBC or The Insolvency and Bankruptcy Code, 2016 is an Act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time bound manner for maximization of value of assets of such persons. It aims to promote entrepreneurship, availability of credit, and balance the interests of all the stakeholders. The Code was passed by the Lok Sabha on 5 May 2016 and by the Rajya Sabha on 11 May 2016. Citation Act No 31 of 2016, Parliament of India.
4.The GST or Goods and Services Tax is a Value added Tax (VAT) on the manufacture, sale and consumption of goods and services intended to replace all indirect taxes levied on goods and services by the Central and State governments. It was introduced from 1 July 2017, after the passage of The Constitution (One Hundred and First Amendment) Act, 2016. The bill was passed by the Rajya Sabha on 3 August 2016, and by the Lok Sabha on 8 August 2016. After ratification by the States, it received assent from the President on 8 September 2016, and was notified in The Gazette of India on the same date.
1 The Surgical Strike
1.The operation was conducted by the Indian Army on 29 September 2016. ‘Kashmir attack: India “launches strikes against militants”’, BBC News dated 30 September 2016, https://www.bbc.co.uk/news/world-asia-37504308
2.‘“Government Is Not Stupid”: Economist Bibek Debroy On Notes Ban’, NDTV interview on 16 November 2016, https://www.ndtv.com/india-news/why-2000-rupee-note-makes-sense-is-necessary-economist-bibek-debroy-1626050
3.‘Did Your Rs. 2,000 Note Lose Colour When Washed or Rubbed? That’s Good News’, NDTV dated 15 November 2016, https://www.ndtv.com/offbeat/did-your-rs-2000-note-lose-colour-when-washed-or-rubbed-thats-good-news-1625787; ‘Reports of Rs 2,000 note bleeding colour have gone viral; we find out if it is really true’, FirstPost dated 17 November 2016, https://www.firstpost.com/india/does-the-rs-2000-banknote-really-lose-colour-heres-the-answer-3108474.html
4.‘How Bizarre! Govt official says Rs 2,000 is original if it loses colour after washing’, Free Press Journal dated 16 November 2016, http://www.freepressjournal.in/bizarre-news/how-bizarre-govt-official-says-rs-2000-is-original-if-it-loses-colour-after-washing/972833
5.‘Demonetisation anniversary: Full text of Prime Minister Narendra Modi’s speech from 8 November 2016’, Firstpost dated 8 November 2017, https://www.firstpost.com/business/demonetisation-anniversary-a-year-later-heres-what-prime-minister-narendra-modi-had-said-on-8-november-2016-4198753.html
6.‘Money laundering networks converting black money thrive amid demonetisation’, Mint dated 5 December 2016, https://www.livemint.com/Industry/hKZbfYwn0jZwS6cl2NoBJJ/Moneylaundering-networks-thrive-amid-demonetisation-chaos.html
7.‘Janardhan Reddy’s spending on daughter’s wedding is as strategic as extravagant’, Hindustan Times dated 16 November 2016, https://www.hindustantimes.com/india-news/janardhan-reddy-s-spending-on-daughter-s-wedding-is-as-strategic-as-extravagant/story-fTwwpHGEGsQ5T1MJWkalSO.html; ‘Indian tycoon hosts £59m wedding for daughter amid cash crunch’, The Guardian dated 16 November 2016, https://www.theguardian.com/world/2016/nov/16/indian-tycoon-gali-janardhan-reddy-extravagant-wedding-for-daughter-cash-crunch; ‘Marriage of the rich, political and powerful in a poor, cashless India’, DailyO dated 9 December 2016, https://www.dailyo.in/politics/demonetisation-cashless-economy-gadkari-daughter-mahesh-sharma-son-wedding/story/1/14467.html
8.‘When banks are awash with cash’, Pulapre Balakrishnan, The Hindu dated 7 November 2017, https://www.thehindu.com/opinion/lead/When-banks-are-awash-with-cash/article17000471.ece; ‘Are banks failing the demonetisation drive?’, India Today dated 13 December 2016, https://www.indiatoday.in/india/story/demonetisation-banks-it-raids-corruption-black-money-357287-2016-12-13
9.Ex-PM Manmohan Singh’s speech in the Rajya Sabha on 24 November 2016
10.‘Demonetisation is Modi’s Napoleon moment: Amartya Sen to India Today’, India Today dated 10 January 2017, https://www.indiatoday.in/amp/india/story/demonetisation-nobel-prize-winning-economist-amartya-sen-pm-narendra-modi-954297-2017-01-10
11.Lawrence H. Summers, former US Secretary of the Treasury and Chief Economist of the World Bank commenting along with Natasha Sarin in a Facebook post. See http://larrysummers.com/2016/11/21/most-sweeping-change-in-currency-policy-in-the-world-in-decades dated 21 November 2016.
12.‘In India, Black Money Makes for Bad Policy’, The New York Times dated 27 November 2016, https://www.nytimes.com/2016/11/27/opinion/in-india-black-money-makes-for-bad-policy.html
13.Kenneth Rogoff, ‘India’s Currency Exchange Gamble and the Curse of Cash’, Princeton Blog dated 17 November 2016, http://blog.press.princeton.edu/2016/11/17/kenneth-rogoff-indias-currency-exchange-and-the-curse-of-cash/
14.Jagdish Bhagwati, Pravin Krishna, Suresh Sundaresan, ‘War on Black Money: Demonetisation is a Courageous Reform that will bring Substantive Benefits’, The Times of India dated 13 December 2016, https://blogs.timesofindia.indiatimes.com/toi-edit-page/war-on-black-money-demonetisation-is-a-courageous-reform-that-will-bring-substantive-benefits/
15.‘Top economists are divided on demonetisation: Who said what?’, Business Today dated 5 December 2016, https://www.businesstoday.in/current/economy-politics/top-economists-are-divided-on-demonetisation-who-said-what/story/241412.html
16.‘How Bibek Debroy countered Manmohan Singh and Kaushik Basu on demonetisation’, Financial Express dated 28 November 2016, https://www.financialexpress.com/economy/how-bibek-debroy-countered-manmohan-singh-and-kaushik-basu-on-demonetisation/458066/
17.Amit Verma, ‘View: Narendra Modi takes a great leap backwards. Mao would approve’, The Economic Times dated 20 November 2016, https://economictimes.indiatimes.com/news/politics-and-nation/view-narendra-modi-takes-a-great-leap-backwards-mao-would-approve/articleshow/55522309.cms
18.Steve Forbes, ‘What India has Done to Its Money is Sickening and Immoral’, Forbes dated 22 December 2016, https://www.forbes.com/sites/steveforbes/2016/12/22/what-india-has-done-to-its-money-is-sickening-and-immoral/#5932f44d17f5
19.Devangshu Datta, ‘Your money’s worth’, India Today dated 8 December 2016, https://www.indiatoday.in/magazine/special-report/story/20161219-cashless-economy-demonetisation-internet-banking-cash-gdp-money-gold-830018-2016-12-08
20.‘The Dire Consequences of India’s Demonetization Initiative and India’s Currency Reform was Botched in Execution’, The Economist dated 3 December 2016, https://www.economist.com/leaders/2016/12/03/indias-currency-reform-was-botched-in-execution
21.Prof. Ajay Shah, ‘A monetary economics view of the demonetisation’, National Institute of Public Finance and Policy, New Delhi, in his column Snakes and Ladders, http://www.nipfp.org.in/media/medialibrary/2016/11/14112016.pdf
22.`One trillion = `one lakh crore
23.‘Banks received Rs12.44 trillion worth old notes as deposits: RBI’, Live Mint dated 14 December 2016, https://www.livemint.com/Industry/tlY53zDhhp9HUe7naM5R5N/Rs124-trillion-worth-old-notes-back-as-deposits-RBI.html
24.RBI 153 Annual Report, p. 219.
25.The BJP won the 2017 UP elections in a landslide victory, capturing 312 out of 403 seats.
26.‘Ram Jethmalani hits out at Modi over black money issue’, The Economic Times dated 31 May 2016, https://economictimes.indiatimes.com/news/politics-and-nation/ram-jethmalani-hits-out-at-modi-over-black-money-issue/articleshow/52527032.cms
27.Paranjoy Guha Thakurta, ‘Did Modi Receive Over Rs 55 Crore from The Sahara Group As The Chief Minister Of Gujarat?’, The Caravan dated 18 November 2016, http://www.caravanmagazine.in/vantage/modi-receive-over-55-crore-from-sahara-group-chief-minister-gujarat
28.While a lower court ordered the CBI to frame charges against these politicians, higher courts ruled that the diary entries did not qualify as admissible evidence. When the CBI didn’t act on the evidence of the Jain diaries, journalist Vineet Narain approached the Supreme Court. His petition became the basis of the landmark Vineet Narain judgement of 1997. In addition to the directions abov
e, the Supreme Court, in an attempt to shield such investigations from political interference, gave constitutional status to the Central Vigilance Commission (CVC), granted it oversight over the CBI, and mandated a fixed tenure of two years to the director of the CBI.
29.‘Modi took bribes from Sahara, Birla: Rahul’, Mahesh Langa, The Hindu dated 21 December 2016, https://www.thehindu.com/news/national/other-states/Modi-took-bribes-from-Sahara-Birla-Rahul/article16918594.ece; ‘Modi scared of questions, has lot to hide: Yechury’, The Statesman dated 12 September 2018, https://www.thestatesman.com/cities/modi-scared-of-questions-has-lot-to-hide-yechury-4-1502460726.html; ‘Charges deserve proper response, impartial inquiry: Sitaram Yechury’, Financial Express dated 22 December 2016, https://www.financialexpress.com/india-news/charges-deserve-proper-response-impartial-inquiry-sitaram-yechury/483051/; ‘PM Modi should follow Advani’s lead and resign: Kejriwal after Rahul’s Sahara-Birla bribe allegations’, DNA dated 21 December 2016, https://www.dnaindia.com/india/report-pm-modi-should-follow-advani-s-lead-and-resign-kejriwal-after-rahul-s-sahara-birla-bribe-allegations-2285249
30.Circular Number: RBI/2016-17/189 DCM (Plg) No. 1859/ 10.27.00/2016-17.
31.Circular No. RBI/2016-17/191 DCM (Plg) No. 1911/ 10.27.00/2016-17.
32.Token interest rate incentives on housing and agricultural loans were announced. Some schemes of the erstwhile UPA Government, such as benefits to pregnant women for institutional deliveries, were also repackaged and renamed, to considerable derision in the media and social media.
33.On 15 November 2016, hearing a slew of petitions against demonetization, a bench comprising Chief Justice of India T.S. Thakur and Justice D.Y. Chandrachud said, ‘Discontinuing of higher denomination notes appears to be carpet bombing and not surgical strike.’ ‘Demonetisation appears to be carpet bombing, not surgical strike: Supreme Court,’ The Indian Express dated 15 November 2016, https://indianexpress.com/article/business/economy/demonetisation-appears-to-be-carpet-bombing-and-not-surgical-strike-supreme-court-4376618/
2 The Role of the RBI
1.I took over as CEO when the Royal Bank of Scotland, acquired ABN AMRO in late 2007. Though ownership of the bank vested with RBS PLC headquartered in the UK, we continued to operate under the licence of ABN AMRO Bank NV, headquartered in the Netherlands, until the RBI granted permission for the transfer to RBS PLC. As CEO and Chairperson of ABN AMRO/RBS India, I was therefore accountable to three Regulators – the Reserve Bank of India, the Dutch Central Bank, and the Bank of England, and was frequently at the RBI to update them on global developments affecting our bank.
2.On 2 August 2017, Arvind Panagariya resigned as vice chairman of NITI Aayog to go back to teach at Columbia University. Ten months later, on 20 June 2018, Arvind Subramanian also vacated his post as Chief Economic Advisor citing family commitments, to return to the US.
3.The Parliamentary Public Accounts Committee (PAC) is a committee of 15 Members of Parliament from the Lok Sabha and 7 from the Rajya Sabha, headed by an MP from the Opposition. It is the oldest of all house panels and its job is to audit the revenue and expenditure of the Government of India. An important function of the PAC is discussion on points of financial discipline and principle. It has the authority to call upon any Ministry or Department of the Government to explain what action disciplinary or otherwise, should be taken in cases of negligence, loss, or extravagance. See https://loksabha.nic.in/
4.On 30 December 2016, the PAC, headed by senior Congress leader Prof. K.V. Thomas, asked the RBI Governor, Urjit Patel, to appear before it on 28 January 2017 and asked him these 10 questions on demonetization. ‘Explain demonetisation, your role, flip-flops, secrecy: Parliament panel to RBI Governor Urjit Patel’,The Indian Express dated 28 January 2017, https://indianexpress.com/article/india/explain-demonetization-your-role-flip-flops-secrecy-parliament-panel-to-rbi-governor-4464383/
5.RBI issued 63 circulars in the 50 days between 8 November and 30 December 2016, and another 5 between 1 January and 30 March 2017, pertaining to the ‘Withdrawal of Legal Tender Character of existing `500/- and `1,000/- Bank Notes’ (or Specified Bank Notes SBNs).
6.Raghuram G. Rajan was the RBI Governor from 4 September 2013 to 4 September 2016. Former Chief Economic Advisor to the Government of India and Chief Economist of the International Monetary Fund and currently the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business, Rajan is regarded as one of the few economists who had warned about the risks to the global financial system prior to the 2008 financial crisis.
7.‘Raghuram Rajan wonders why cash with public grows during elections’, The Indian Express dated 6 April 2016, https://indianexpress.com/article/elections-2016/india/india-news-india/raghuram-rajan-wonders-why-cash-with-public-grows-during-elections/
8.‘Note ban planned carefully by RBI, Rs 500 note only hiccup: R. Gandhi’, LiveMint dated 5 April 2017, https://www.livemint.com/Industry/Nx9c5yKWRKsoo625u3Ae2N/Note-ban-planned-for-carefully-by-RBI-Rs500-note-only-hiccu.html
9.In June 2018, R. Gandhi joined One97 Communications, which runs Paytm, as an advisor (‘Career central banker R Gandhi joins Paytm board as an advisor’, https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/career-central-banker-r-gandhi-joins-paytm-board-as-an-advisor/articleshow/64658301.cms). As Paytm was considered to be one of the biggest beneficiaries of demonetization (‘Thanks to demonetization, Paytm is making Rs 120 crore per day; achieves target before deadline, crosses $5 billion GMV’, https://www.businessinsider.in/thanks-to-demonetization-paytm-is-making-rs-120-crore-per-day-achieves-target-before-deadline-crosses-5-billion-gmv/articleshow/55541691.cms; ‘Demonetisation anniversary: How mobile wallets like Paytm made a fortune post note ban’, https://www.financialexpress.com/economy/demonetisation-anniversary-how-mobile-wallets-like-paytm-made-a-fortune-post-noteban/924491/; ‘Few big players dominating digital payments is a risk, warns RBI’, https://economictimes.indiatimes.com/news/economy/policy/few-big-players-dominating-digital-payments-is-a-risk-warns-rbi/articleshow/64480116.cms), this generated considerable speculation. Questions were raised as to whether he had received prior permission in accordance with the RBI policy, which stipulates a ‘cooling period of two years’, to prevent collusion or conflicts of interest (https://twitter.com/Subytweets/status/1009307892791459840). ‘The policy provides that the officers should seek prior permission of the RBI during a period of two years from the date of cessation of their service before taking up such employment. Before granting permission, it is ensured that the position being sought by the retired officer does not bring in any conflict of interest on account of the portfolio held by the officer in the immediate past. In respect of retired senior officials, the decision vests with a high-level committee.’ See RBI website (https://www.rbi.org.in)
10.‘Rajan unfit to be RBI Governor: Swamy’, The Hindu dated 12 May 2016, https://www.thehindu.com/news/national/Rajan-unfit-to-be-RBI-Governor-Swamy/article14315351.ece
11.‘Raghuram Rajan not Indian at heart, should be sacked: Subramanian Swamy’, The Hindu dated 17 May 2016, https://www.thehindu.com/news/national/Raghuram-Rajan-not-Indian-at-heart-should-be-sacked-Subramanian-Swamy/article14324616.ece
12.‘“Sack him”: Subramanian Swamy writes to PM Modi again, lists 6 “charges” against RaghuramRajan’, The Times of India dated 26 May 2016, https://timesofindia.indiatimes.com/business/india-business/Sack-him-Subramanian-Swamy-writes-to-PM-Modi-again-lists-6-charges-against-Raghuram-Rajan/articleshow/52448258.cms
13.‘Full text of Subramanian Swamy’s letter to PM Modi on RBI Governor RaghuramRajan’, One India dated 29 May 2016, https://www.oneindia.com/india/full-text-subramanian-swamy-s-letter-pm-modi-on-rbi-governor-2112485.html
14.‘Arun Jaitley says he disapproves of personal attack on Raghuram Rajan’, LiveMint dated 26 May 2016, https://www.livemint.com/Politics/FSY3aU6k4yF5Zrg6glaJUO/Arun-Jaitley-says-he-disapproves-of-personal-attack-on-Raghu.html; ‘Arun Jaitley says RBI, finance ministry
share a mature relationship’, LiveMint dated 16 June 2016, https://www.livemint.com/Politics/VktPGZbmlktMnmPl5CejzI/RBI-finance-ministry-share-mature-relationship-Arun-Jait.html
15.Extract of Raghuram G. Rajan’s letter dated 18 June 2016, addressed to all RBI employees. See https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=37259
16.Urjit Patel was an independent director and chairman of the Audit Committee of GSPC from 2006–2013. During this period, GSPC’s bank loans rose from `270 to `14,000 crore. The CAG in its report on public sector firms in Gujarat for the year ended March 2015, said that GSPL, a subsidiary of GSPC, had bought overseas blocks between 2006 and 2010, though it had no prior experience as an overseas operator. ‘The delayed execution of the work committed resulted in cost escalations in these overseas blocks. The company surrendered 10 out of 11 overseas blocks during 2011–15, incurring an expenditure of `1,757.46 crore of which `1,734.12 crore was written off.’‘CAG slams GSPC for mismanagement of overseas blocks, KG Basin’, LiveMint dated 1 April 2016, https://www.livemint.com/Politics/7kElIpCkdxzIi2SjPBP5RI/CAG-slams-GSPC-for-mismanagement-of-overseas-blocks-KG-Basi.html
17.NSEL, provided an electronic platform for spot trading in farm products and bullion. It was embroiled in a major scam that came to light after the government, in July 2013, restrained the exchange from trading, as commodities that were traded were not found in the warehouses. The exchange defaulted payments to about 13,000 investors and had to be eventually shut down. The Enforcement Directorate (ED) had registered a criminal case under the Prevention of Money Laundering Act (PMLA) in 2013, along with the Economic Offences Wing (EOW) of Mumbai, police to probe the case. The ED filed a 20,000-page charge sheet against NSEL and 67 others in a Mumbai court, explaining NSEL funds were laundered and ‘illegally ploughed into purchase of private properties’. The charge sheet detailed a money trail amounting to `3,721.22 crore. ‘The NSEL Scam and History’, https://capitalmind.in/the-nsel-scam-and-history/