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Business News/ Politics / Policy/  Demonetisation has achieved 50% of objective: Subramanian Swamy

Demonetisation has achieved 50% of objective: Subramanian Swamy

The senior BJP leader and Rajya Sabha member on demonetisation, the harm done by corruption to India, his equation with Narendra Modi and other issues

Subramanian Swamy says the government should have prepared a contingency plan so that the ordinary people, particularly in far-flung areas, do not suffer following the demonetisation. Photo: Priyanka Parashar/MintPremium
Subramanian Swamy says the government should have prepared a contingency plan so that the ordinary people, particularly in far-flung areas, do not suffer following the demonetisation. Photo: Priyanka Parashar/Mint

Hong Kong: Senior Bharatiya Janata Party (BJP) leader and Rajya Sabha member Subramanian Swamy says had he been consulted, he would have suggested to the government that people who return demonetised currency notes be exempted from having to pay income tax on the money.

“I would have suggested don’t do it alone. Do it with the abolition of income tax so there is a big relief for the common man. People would have been jubilant. I think this will happen soon though," Swamy said in an interview during a visit this week to Hong Kong.

Swamy, who has taught for 10 years at Harvard University, spoke about the harm done to India by corruption, his equation with Prime Minister Narendra Modi, former Reserve Bank of India governor Raghuram Rajan and other issues in the interview.

Edited excerpts:

Does the decision of the “surgical strike" on black money signal a radically new political and economic landscape? Prime Minister Modi has staked much on this game-changing move with the view to reduce corruption and curb terrorism. Do you think he is succeeding?

We have achieved 50% of the objective in large part in my view from the demonetisation. Practically all demonstrations in Kashmir have stopped, even though the Kashmiri government has done nothing new to pacify the people there. Through demonetisation, we have knocked out the counterfeit printing of Indian currency by Pakistan, which was done with the aim of funding terrorism in Kashmir. The counterfeit notes they produced were so akin to our legal currency that it was difficult to tell it apart. The reason was that the previous government gave the contract for currency paper to the same London-based company that supplies currency paper to Pakistan. This aided Pakistan counterfeit Indian notes and finance militancy in India at zero cost. Now, they don’t have the money to fund terrorism with ease with demonetisation.

You have been highly critical about the implementation of the demonetisation of higher currency notes. Why?

We should have prepared a contingency plan in advance so that the ordinary people, particularly in far-flung areas, do not suffer. We are now learning by doing. The ministry not being in loop of decision-making is no excuse. We have been in power for nearly two-and-a-half years and there has been a discussion about it for a long time. The finance ministry should have prepared for this from the very first day.

I would have also rolled this out differently. I had suggested don’t do it alone. Do it with the abolition of income tax so there is a big relief for the common man. People would have been jubilant. I think this will happen soon though.

We should have also told the corporates and all other major public sector institutions like universities, police, military and others that it is their responsibility to do the conversion to the new currency for all their employees, and the government will ensure enough new currency supplies to these institutions directly.

What is your view of the new steps announced by the government to ease the pain of demonetisation?

I am happy to see the urgency though in PM’s thinking and the new measures he has taken now of banks waiving ATM charges, extending the usage of existing currency to November 24, higher limit withdrawal per day and per week, recalibration of ATMs (automated teller machines) and other steps.

How would you define your relationship with Modi?

I get along well with him. He respects my views despite the fact that I am blunt with him and say things that others don’t. He withstood enormous pressure and took global criticism for example in the case of Raghuram Rajan, the RBI (Reserve Bank of India) governor, as he knew my advice was well-founded. He (Rajan) was hell-bent on raising interest rates for controlling inflation. That’s like a doctor saying the best way to bring down his temperature is to kill him. Economics is about general equilibrium, not disequilibrium. I was solely responsible in building up a case against him. This decision has proven to be right as the economy has not suffered and no one in India today talks about or misses Rajan.

You have been called an unapologetic Hindu nationalist and a destabilizing factor that can sometimes embarrass the Indian prime minister with your outspoken comments that don’t always reflect the party’s views. Do you agree?

These are Delhi durbar rumors. If this were the case, the party would call up and tell me. The PM is sure that I am not doing anything out of line, and that I am loyal to him and committed to his agenda. I was amongst the first people to propose that his name should be considered for prime minister. I also campaigned for him in a way nobody else did.

I am not doing anything outside of what the party manifesto is committed to. The PM is pursuing development and governance, while I am focusing on the remaining BJP manifesto. I have the support of the party and the PM in the causes I champion.

You have said that development is necessary but not sufficient to win elections. Please explain.

Development alone has never won an election for anybody. The most successful development Indian PM was (P.V.) Narasimha Rao, and he lost badly. The most successful development chief ministers were (N.) Chandrababu Naidu (of united Andhra Pradesh) and S.M. Krishna (of Karnataka), and they both lost.

To be successful in elections, you also have to have a strong emotional appeal that speaks to the majority of people. In our case, it is the Hindutva cause. Making Hindus unite and rise above their caste, language and regional differences, and vote for us. And we have been able to successfully do this in the last national elections.

What is your view for engaging with Pakistan to resolve the Kashmir issue?

In the case of Pakistan, there is no civilian government or leader worth talking to. So, we are dealing directly or indirectly with the military, ISI (Inter-Services Intelligence) and terrorists. They consider India an unfinished chapter of Islam. And, therefore, another war is inevitable. They will find an excuse to make a military strike and attack us. But, from India’s side, we are prepared; and this one should be decisive in our favour. We are making all possible contingency plans. We will never have peace till we finish the Pakistan problem.

When most of the world was condemning (US president-elect) Donald Trump for his radical rhetoric against Muslims and other minorities, his recklessness, ignorance and incompetence, you firmly predicted his victory. Why?

I also predicted Narendra Modi’s victory. I knew a large section of the disenfranchised majority of both countries never went to vote before as they were never stirred up by any of the other candidates. This section of the population was also outside of the sampling number of polls.

Similar to how Trump spoke to white America despite being criticized for it by the liberals, Mr Modi paid attention to the legitimate grievances of the Hindus, who form 80% of India, and felt they had been made secondary citizens in their own country. They both succeeded as no other candidates were willing to speak directly about the issues of the majority population of both nations.

What does Trump’s victory signal first and foremost in your view?

Trump’s victory announces the demise of political correctness once and for all. People want leaders to say it as it is.

Do you agree with the view that there are many similarities between the leadership styles and personalities of Donald Trump and the Indian prime minister? Or do you think this is a simplistic analysis?

PM Modi is certainly not so outspoken or expressive as Trump is about his views. But he does make his intent known through his successful political and policy moves, which are in the interest of the nation. His actions distinguish him from the others.

But he is less teamwork-oriented than Trump. His search for talent is defined by how he can make things work in implementing his governance agenda, rather than pick the guy who is most qualified for the job. He is less of a risk taker in that sense, perhaps, because he is not an insider of Lutyen’s Delhi, and needs people he thinks can work the system in Parliament and with the opposition. So, talent is secondary for him. To be able to work with the system and get things done is more important. Trump is the opposite. It is evident in his selection of his team, as it is emerging.

How will Trump’s personality affect his engagement with India and the rest of the world?

His basic character is compromise. He is a successful negotiator who knows the game of give-and-take well. Unlike what has come across in his campaign, he is a pragmatic, polished and considerate (person) who will respect world leaders according to their stature. He will be willing to work productively with Mr Modi. So, he will be successful, in my view, for India and America.

Fighting endemic corruption has been the centrepiece of Modi’s agenda. You have been regarded as one of the most effective fighters in the party for exposing corruption in recent years by becoming a force behind some of India’s landmark corruption cases such as the 2G spectrum scam. What do you see as your contribution in fighting corruption and why did you take up this cause?

I find the large-scale practice of corruption over time by Indian politicians and businessmen to be appalling. The Indian economy has been destabilized systematically since Independence by their corruption. I felt compelled to do something radical to expose it. Unless you get the people at the top, you cannot create the necessary fear factor for people to change at the bottom.

Hence, I petitioned the Supreme Court in 2010 to prosecute the telecommunications minister at the time over his involvement in awarding cell phone spectrum to companies below market rates. That helped fuel the perception of widespread corruption and led to the defeat of India’s long-time governing Congress party.

In what strategic ways has corruption hurt India’s economy in your view?

Corruption has hurt our country in four significant ways.

First, we have calculated that directly and indirectly, 70% of economic investments have been diverted into non-essential economic activities that generate a very high rate of return, but harm the economy and the common man. Cash—which could have been used in building factories, roads, schools, hospitals and other productive assets—is used for buying properties, palatial mansions and other high-end consumer goods. The investment priority in the country has, thus, been distorted over time as these assets have historically earned a higher return of rate on investment.

Second, corruption has led to significant stock market instability. In India, corrupt money is sent abroad through the hawala channel and returns through a financial derivate that no country has invented—but the fertile mind of the Indian—called the participatory note. These are issued by Morgan Stanley, US Fidelity Investments and Goldman Sachs. It has no name, no date, nothing, except the amount you put in.

All you have to do to get it is show your Indian passport abroad and bring it back to India, and then you are free to invest in the Indian stock market. In recent years, the rise in foreign investment is largely due to portfolio investments, and that is something that can go in and come out anytime. This has caused a great deal of instability in stock market prices.

Third, despite the abundance of agricultural production in India, corruption has led to an artificial shortage and volatility and hike in the prices of agricultural products. This has been done by hoarding and through permitting forward trading in agriculture.

Fourth, corruption in India has consistently induced the massive production of substandard products that have been proven time and again to be dangerous to the Indian consumer’s health and safety.

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Published: 18 Nov 2016, 01:07 AM IST
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