Interview with Economic Affairs Secretary: ‘Limited time window will keep electoral bonds from becoming a parallel currency’

Interview with Economic Affairs Secretary: ‘Limited time window will keep electoral bonds from becoming a parallel currency’

On the proposed electoral bonds, Das, in an interview with the Indian Express, said that a limited time window for electoral bonds will help avoid the danger of them becoming a parallel currency.

 Economic survey, union budget, economic offenders, shaktikanta das, electoral bonds, black money, demonetisation, RBI act, India news, Indian Express
Shaktikanta Das

The government felt the need to propose legislative changes for confiscation of property of economic offenders, who are avoiding the “reach of law” by staying abroad, Economic Affairs Secretary Shaktikanta Das said. On the proposed electoral bonds, Das, in an interview with Aanchal Magazine and Sandeep Singh, said that a limited time window for electoral bonds will help avoid the danger of them becoming a parallel currency. Edited excerpts:

The finance minister said the confiscation of property of law evaders would be within constitutional safeguards. How is it being proposed?

The government is proposing two options. One option is to amend some of the existing laws to achieve the objective of what the FM has stated. The other is the option of coming out altogether with a new legislation. Obviously any decision that the government takes, it will have to be within the parameters of the Constitution of India and the rights it gives to the citizens.

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So right to property will be maintained …

I would not like to elaborate on that. But it has to be within the constitutional framework.

Benami law has a provision for confiscating benami property …

But it is different from benami. It is for somebody who has fled the country and is escaping the reach of law. He is not submitting himself before the law enforcement authorities, who are duly authorised under the law of the land to enforce certain laws. They are not submitting themselves even before the courts. It applies to such people, those who are avoiding the reach of law by being abroad.

On electoral bonds, there is some concern that it is not exactly transparent. Also, why is a change in RBI Act required?

These bonds can be purchased by digital or cheque payment. It cannot be fictitious. It will be only through a KYC-compliant account. Therefore, the money is legal and white. It’s a bearer instrument in which the name of to whom it belongs is not there. The person who buys it, either himself or through somebody, he gives it to a political party, which has to necessarily deposit it in its designated account. Thereafter, the piece of paper acquires value. As long as it is not deposited in his authorised account, it is just a scrap of paper. A very limited time window will be given. Otherwise, it has the danger of becoming a parallel currency … so, the source is legal and at the recipient level also, there is accountability because he has to declare it in his tax return. The tax return will not show the identity of the donor and it will provide anonymity to the donor, which is very important.

The government’s interaction with various political donors has shown that under the current system, people are prone to generate cash because they don’t want one party to know how much cash they have given to the other party. That creates difficult situation for them if they give more to some and less to somebody, so they want anonymity. Cash gives them that anonymity. They then write cheques in name of XYZ and then they generate cash and then the political parties use it. That is the route where they generate cash in an unaccounted manner. Then it becomes black money. Therefore, this decision will ensure no black money is generated by driving out cash or inflated cheques for payments.

Then why not remove the cash portion completely, people show ingenuity in manipulating rules …

We have to look at it this way. Earlier it was Rs 20,000 (limit), now it is Rs 2,000, so ten times improvement. It’s a big improvement on what was happening earlier. If someone was writing one chit, now he has to write ten chits. So therefore it’s a big improvement from what was there earlier. Also, there was recommendation from the Election Commission to keep it at Rs 2,000.

Why a change in RBI Act for electoral bonds?

Under Section 31 of RBI Act, the bearer instruments can be issued only by the Central government or the RBI. Now we are empowering the designated authorised banks also to issue the bearer instruments. So government will decide which bank, the modalities will be decided. The details will come out when the scheme will be notified.

The Economic Survey mentioned that there will be fiscal windfall from demonetisation and PMGKY, but the Budget has no mention of these …

We have not factored that in … we will get clarity only when the numbers are finalised by the Reserve Bank (of India) and only after the physical verification of counting and in any case, now the window is open till June 30, so it will take some time for the RBI to give final figures. As and when we get the final figures, naturally that will come. For Budget, we try to be realistic with regard to numbers and on these numbers, it is better to be conservative. As and when we get something more, it’s a bonus, it’s an additionality, which will help the government to improve its fiscal numbers. For PMGKY (Pradhan Mantri Garib Kalyan Yojana) also, usually past experience shows that all these opportunities which are given to taxpayers, people use these opportunities only in the last 10-15 days. At the moment we don’t have clarity about how many people will use the facility which has been given under PMGKY. It is difficult and will be incorrect to assume a number and add it to the receipts.

Why is it taking so long for the RBI to come out with final numbers on demonetisation?

It was realised that there was some areas where possibly double counting was taking place. In matters like this, the RBI has to be absolutely correct. So, therefore, they are doing the physical counting of the notes. And counting of the notes has certain capacity. You don’t have the facility for counting notes of this volume, you have the business as usual approach. This is a huge volume which has come in, so it is taking time.

Fiscal prudence was the theme of this Budget with only a 0.2 percentage point increase in fiscal deficit for next year …

There was a need to spend more in certain sectors like infrastructure, roads, railways and certain critical social sectors. We also had commitment on crop insurance schemes, the other agricultural and rural development schemes. The requirement in the current scenario was to spend more in these sectors. At the same time, a balance had to be maintained with fiscal prudence. We thought that 3.2 per cent is adequate and more importantly, the NK Singh committee has given a debt-GDP target of attaining 60 per cent by 2023. So we felt that at 3.2 per cent fiscal deficit, we would be able to keep that target.

Higher debt and higher borrowing influenced Budget decisions …

Naturally. With 3.2 per cent, the government will still be able to achieve 2023 debt-GDP target.

With private investment not happening, was there a thought on pushing government expenditure?

The government needs to spend more in some sectors that I mentioned and that is where the government decided to spend. The government doesn’t invest usually in areas of manufacturing and services … these investments will create new employment opportunities, which will also give a boost to demand. So there will be some multiplier effect.

Allocation for capitalisation of banks has been kept low …

This is according to the Indradhanush plan … if they require more, the finance minister has said that the government will give more to them. Banks are anyway flushed with low-cost deposits which the banks should now be in a position to lend and to get better return on their lending operations. Since the yields of govt securities have gone down, old bonds which they (banks) are holding, their capital value goes up. Therefore, Rs 10,000 crore under these circumstances is considered quite prudent.

How confident is the government on the disinvestment target given the past experience?

This time it is possible … this time strategic disinvestment will be undertaken, plus there is opportunity arising out of listing of the insurance companies. Then the railway public sector enterprises, which carry a very high value. Also, there is going to be revised mechanism where the listing of the CPSEs will be done in a time-bound manner who are yet to be listed. The list is prepared and they will get listed as per the timeline, which will be specified … there is another CPSE ETF which is going to be launched next year, for raising additional resources…for strategic sale, NITI Aayog has prepared a list and that will be operationalised.

How will the shelving process of FIPB move ahead?


We thought that time has come where the matters can be handled by individual ministries and departments and wherever, FEMA related issues are there, they can consult the Department of Economic Affairs. FIPB was formed in an era of delicensing, when FDI just started happening. Now, 90 per cent FDI comes through automatic route and mainly for telecom, defence and certain other sectors, it requires government approval. So, there also we will find a way of delegating to the regulator or the ministries concerned.