Demonetisation is temporary, cosmetic, says Global Financial Integrity
New Delhi, Nov 22: According to Dev Kar, chief economist, Global Financial Integrity and a former senior economist at the International Monetary Fund (IMF), the effect of demonetisation on curtailing black money is temporary and cosmetic.
On November 8, Prime Minister Narendra Modi in a televised address to the nation announced the demonetisation of Rs 500 and Rs 1,000 currency notes in order to fight against black money, counterfeit currencies and terror funding.
In an interview to News 18, Kar said, "The effect of demonetisation on curtailing black money generation will be temporary."
He added, "I call such moves to be essentially cosmetic, as in the interim black money operators come up will all sorts of ways of circumventing large settlements in cash. To the extent that the basic structures and incentives offered by weak governance remain, in effect, demonetization can provide a temporary brake on illicit cash transactions and decimate past cash holdings."
"But as long as those incentives and loopholes remain, black money generation, transfer, and utilization will come roaring back. These schemes have been tried in a few other countries (including India in the past) and the results have been just that, nothing beyond a temporary setback for black money holders."
The GFI is a non-profit, Washington, DC-based research and advisory organisation, which produces high-caliber analyses of illicit financial flows.