Monday, February 22, 2010

Dark Money

I have been wanting to write on this topic for a long time now. A day before I saw a Telugu movie called "Leader"(nice movie!) and revived interest on this topic. Though I knew for quite sometime that people do have black money I never realized the huge volumes till I saw the movie Shivaji!

To give a good feel of the volumes, I will quote the numbers used in the movie "Leader". According to this movie there are 8 crore people in Andhra Pradesh and one Lakh crores of black money!

Dark money(the way I refer to it) is a result of dark deeds or more clearly illegal/corrupt money. Everyone wants justice when they are robbed or anything unjust/unfair happens, but many don't seem to mind having/making illegal money.
People who have dark money should be worried that they are the sources of target for terrorists/naxals as they have huge amounts of unaccounted money primarily in the form of cash. "Idle money is devil's workshop!"



Photo: Money is the root of all evil

How are the people with lump sums of "Dark Money" able to spend them? Most of them actually use the money illegal stuff like betting to make more money others convert them into white cash through setting up NGOs and many more ways. Income Tax officers though can/do identify such people they are easily lured into sharing the huge amounts of money.

So how does one resolve the issue, one possible idea on how to fight corruption which is the primary source of dark money is at ted


The author is effectively suggesting creation of private organization to do what the government should be doing.

I will write some other time on the underlying issue why corruption exists but now we will focus on how to try and resolve it given that it exists. Not being able to track the money movement is one of the biggest reasons why today we are unable to successfully arrest/tackle corruption. So how can one track money movement? Getting rid of cash is the only solution. All transactions should be converted to digital form either through credit/debit cards or even peer to peer transfer of funds using phones. It's a huge investment from government part and there are plenty of challenges in it but the government should move towards it.
Government can make changes in phases -
1. First step would be creating unique identification(UID) for every individual which the government is already set on doing with the help of "Nandan Nilekani"
2. Convert the pan card/uid into bank card with a standard account in a central government based bank which does not provide any interest.
3. Give incentives to credit/debit card transactions over cash based transactions or may be even levy small tax on cash based transactions to incentivize usage of cards.
4. Slowly end cash transactions once people get used to card based transactions.

The identification of every individual digitally helps in other places like ensuring that the poor people receive the fund allocated for their improvement and many more.

3 comments:

Anshul said...

This is the most horrible idea I have read in a while. The government has no business knowing who I deal with and why. This would be an invasion of privacy beyond ridiculous. Even the worst kinds of nanny police states don't have that...

Parthasaradhi said...

I agree privacy is a big concern if the information is available to everyone but if the information is only restricted to small set of people who's objective is only to trace dark money then I hope its fine. BTW currently even your cell-phones conversations are not completely private if that's what you want or neither your emails. For legal purposes everything changes so think of it as if a legal entity is trying to solve a problem rather than invading your privacy(with huge volumes of data I think they would be least bothered about what you do with your life!)

Anshul said...

Umm... Saradhi da, back in the day a court order was required to tap a phone. I don't think that has changed or I will have to conclude that India has become a police state. Do correct me if I am wrong.

Can you imagine someone being able to bribe/coerce/hack/steal all the financial dealings of his political opponent or wife? Imagine if the perpetrators of Godhra riots could run a sql query to find out who is doing the most business with Muslims. Privacy is not just a theoretical concept. Data is a sword that cuts both ways. There is some data which the government has no business storing, touching or even requesting for unless the judicial system has been convinced that doing so is absolutely necessary.