Electromagnetic flowmeter Manufacturers of lost taxes

　　But a good part will also be in stock and we will never know how much will end up in the Ganga, like it was shown on TV on November 9.To be sure there is huge tax evasion in our system. Even if the National Institute for Public Finance and Policy (NIPFP), the ministry of finance’s in-house think tank, estimation of a parallel economy equal to about 68 per cent of the GDP is not accepted and the figure of 20-25 per cent often cited by the multilateral agencies like the IMF and other authorities is accepted, we are looking at a parallel economy of about Rs 30 lakh crores. This implies about Rs 10 lakh crores electromagnetic flowmeter Manufacturers of lost taxes.The demonetisation exercise would not fetch even a small fraction of it, largely because most of the undeclared income undergoes metamorphosis into property, gold and foreign holdings leaving only about four to five per cent within the cash system. So at the IMF end we are looking for about Rs 1-1.5 lakh crores at least and at the NIPFP end we are looking for about Rs 3-4.5 lakh crores at least.

　　The tax gains thus could at best be between Rs 50,000 crores and Rs 1.5 lakh crores.Now we hear murmurs of expectations of about Rs 4 lakh crores, which if so suggests that the NIPFP estimates are closer to the reality? After imposing penalties (30 per cent + 30 per cent) this should fetch the govement about Rs 2.4 lakh crores as taxation.But remember this is for the most part of it a one-time exercise. All our past experiences show we revert to past practices and habits. But there are only so many demonetisations one can have in a lifetime. Frequent demonetisations will only diminish the credibility of the rupee and the RBI. With currency no longer linked to gold, its value is only in its credibility and no govement should keep risking this.Against this one-time gain of at best about Rs 2.4 lakh crores, what did we lose? The loss due to the unprecedented drop in production and income to the economy this year is now widely accepted by economists to be around two per cent of GDP.

　　This is almost `3 lakh crores. The cost of printing replacement notes is expected to be Rs 40-50,000 crores.There are huge human costs implicit too. India has a workforce of close to 450 million. Of these only seven per cent are in the organised sector. Out of these 31 million about 24 million are employed by the state or state-owned enterprises. Of the vast reservoir of over 415 million employed in the unorganised sector about half are engaged in the farm sector, another 10 per cent each in construction, small-scale manufacture and retail.These are mostly daily wage workers and mostly eaing less than the officially decreed minimum wages. The average daily wage in India is Rs 272, which means that it is essential to have a good part of that for a typical family to have to escape starvation every day. Just visualise the cold hearths in these homes and children going to bed cold and hungry. At least 22 crores of daily workers have suffered loss of work.