In the past two weeks the world has covered just about every angle with regard to the Indian initiative to demonetise two major banknotes.
If there is any interpretation left unsaid it can only be ‘a cute’ one, if you get the drift. Kaushik Basu, the chief economist of the World Bank and former chief economic adviser to the Indian government has gone on record as saying that economics is not a moral subject and further, India’s black money was a bulwark against financial disaster. He is quoted so by the BBC. There are others who echo his sentiment that the parallel economy was a lubricant and so deeply part of the Indian fiscal DNA that ripping it apart without adequate replacements is akin to walking on very thin ice.
Since I can hardly handle my own budget and have lived in a state of fiscal wreckage most of my earning life, I cannot comment on the arrogance, accuracy or patronising nature of the statement with any degree of knowledge. By the same token, I cannot deny there may be a kernel of truth in that black money, like coffee, percolates to the lowest levels.
Take Indian weddings. They are largely fuelled by liquid cash and lavish expenditure to get rid of extra money and make peers green with envy is a given. That extravagant expenditure will stop, has stopped. Perhaps under the Basu doctrine what it did achieve was go to those labelled as the ‘lower levels’ and the thousands of caterers, cooks, cleaners, drivers and wait staff and decorators including the ubiquitous flower seller. Money was also dispensed as acts of charity to those who stand on the edge of the rich man’s garden looking on because they are not permitted to walk on the grass. Such giveaways were auspicious.
That’s why it always called for caution when media lauded those who had weddings in Bali and Phuket because if you were that wealthy and you had pots of money have the wedding at home. Spend another million, don’t keep it hidden. Now, it isn’t going to be easy to exercise opulence and the spartan Morarji Desai doctrine will hurt millions who made a living scraping the relatively substantial crumbs from the rich man’s table.
By the same measure selling land and property in up to 80 per cent black (or what in India is termed under the table) from the circle rate has had the stuffing taken out of it. Who’s selling and who is buying? Nobody. For a long while that market will wriggle in the dust with none to do it reverence. If leaping of ledges was an Indian escape route there would be a stampede of property dealers breaking down the window.
Unpaid EMIs will bruise the nation dramatically come the first week of December and distress sales will amplify.
Another bruising will be to art per se, sad but true. Subjective creativity has to suffer because you pay for your love of it, a canvas, a sculptor, a grand piece of art, and that passion has no fiscal boundaries. Collectors with undisclosed wealth are like one of those species that make naturalists go berserk. On the verge of extinction. How much would you pay for a Faberge egg or a relic or an antique if you have to sign a cheque for it and explain it to the tax authorities?
Also, hurting would be the tourism industry. It was fun to fly the family first class with the maid in Biz class and book a suite in a five-star hotel because there was so much lolly to squander. It had to be spent rapidly to make room for more. Now, you would look pretty conspicuous doing that and big brother could be watching. The same goes for high-end restaurants because it was a doddle to take 20 relatives out for dinner and cough up a hundred thousand and then some but who is that pink panther lurking in the corner with IT (tax, not technology) writ large on his bureaucratic face. Ruins the just desserts.
Going abroad and arranging sacks of foreign exchange by full time bagmen living in different parts of the world was no sweat because the rider in the rain would fetch up to lighten the load in the cupboard, place the stacks of money in a worn satchel and so what if you lost 4 per cent to 10 per cent in the transaction, it was only coloured paper anyway. And like with the wine in the Secret of Santa Vittoria there were a million more where that came from. Will people invest in theatre, in the performing arts, will companies back off research because research is usually the first casualty when it is time to cut back? These are all on the anvil waiting for the sledgehammer.
Medical institutions had become a major money spinner with India’s hypochondriac and spanking new rural rich society thronging the urban premises ready to pay exorbitant prices, nearly $200 billion slated to be the healthcare expenditure by 2018.
Already, in just two weeks, the lobbies of the 5-star hospitals that were jammed with patients paying cash are beginning to look sparsely populated. No cash, no cure.
Doctors, lawyers, businessmen, wheelers, dealers, tinker, tailors, sharing undisclosed incomes.
Another powerful blow has been dealt to the jewelry industry especially since the demonetisation has coincided with the wedding season. Picking up ‘baubles’ for wads of cash moved into genuine Gucci handbags fresh from the master bedroom cupboard or domestic safe has practically ended as a fun afternoon pursuit of marital happiness, that bliss already being blighted by the laughable limit of Dh15000 being allowed for weddings. Hardly enough to cover paying the pundit.
The good life has suddenly become passe and even celestial appeasement could well be a target.