Feb 28, 2024
Feb 28, 2024
Prime Minister Mr. Narendra Modi is an admirer of China’s model of development. Bullet trains, modern infrastructure and smart cities are his refrain. It is a material approach. Now the government has decided to utilize corruption in order to speed up development. It has revived the Kisan Vikas Patra scheme which provides a safe and sure method of laundering black money to make it white.
Kisan Vikas Patra is a government sponsored savings scheme that doubles the money invested in less than a decade. The Government sells these saving bonds through Post Offices across the country. The bonds can be encashed after two and a half years from the date of issue at the value they are bought plus interest for the period. The interest earned is taxable which makes the amount retrieved legitimate regardless of its original source. It is a Godsend for money launderers. Although funds are earmarked for interests of farmers any individual can buy up to Rs. 50,000 bonds with cash without giving Permanent Account Number (PAN). To organize spurious proxies for laundering black money is not difficult.
Why has government revived a scheme discarded earlier?
Most likely the government wants to circulate black money laundered white for productive purpose to help speed up development. Taking a cynical view of morality, corruption is condoned for quick economic development. This scheme may be rationalized as a means of recovering black money for national development. Unfortunately there is a serious flaw in this reasoning. Moral issues apart, corruption cannot speed up economic development but can only slow it down. The very act of corruption implies that money which could be used for legitimate purpose is siphoned away to profit the perpetrator. Many acts of corruption also entail diverting part of money from its original purpose to non use through corruption. In the long run this impedes the rate of development and does not quicken it. The Kisan Vikas Patra scheme will encourage the corrupt to create more black money because they will have the means to make it white.
This writer has repeatedly advocated a voluntary disclosure scheme guaranteeing confidentiality to legitimize black money by its holder surrendering a prescribed percentage to the state. If this is accompanied by a cutoff date followed by relentless prosecution of those who not confess it would not only clean up corruption but also retrieve substantial amount of black money for legitimate purpose. But to implement this policy requires will and the readiness by politicians cutting across parties to surrender part of their illegal wealth. Perhaps they feel more secure with conditions as they are. It is a dangerous view.
Mr. Modi said black money can destabilize world peace. He pledged to eliminate it. He is doing it by allowing all black money to become white. Thus there will be little or no black money. But corruption will increase a thousand fold because of this safe passage for money laundering.
More by : Dr. Rajinder Puri
Long back, in late 80s 9or very early 90s) a more useful scheme "Indira Vikas Patra" was introduced while "Kisan Vikas Patra" existed.
The difference between the two was that the Indira Vikas Patra would double the money in 5 years and it did not bear name and other details of the policy holder, where as Kisan Vikas Patra would double money in 5.5 years and would bear name of the policy holder.
I haven't heard that India Vikas Patra or KVP generated inflow of black money into them (to significant levels). But later there were two amnesty schemes launched by successive governments to declare black money (one of the scheme was named "Samadhan") that had attracted huge inflow, the government collected huge amount of taxes (w.r.to value of money in that time), I think 4000+ and 10000+ Crore rupees respectively.
Further, the PM mentioned that the black money posed a threat to world peace and national security (incidentally, I had put similar thoughts in one of my comments here on boloji) - he is talking about huge money stashed in foreign accounts and not the money in India. The black money in foreign accounts is obviously held by giant fishes, if they need to utilize channel of Kisan Vilas Patra, first they need to bring the money into India and then split into 50000 INR each and buy Kisan Vikas Patra.
Giant fishes can surely find better options already available. And as mentioned by the FM, existing laws do not create enough fear in mind of offenders, first the laws need to be improved (and enforced), which means the government is working in direction to really take concrete steps to curb money laundering.