By Sanjay Thapa
Edited by Madhavi Roy, Senior Editor, The Indian Economist
After PM Modi’s much brandished Jan Dhan Yojana, NDA’s latest
‘financial inclusion’ jig is the revival and re-launch of the KISAN VIKAS
PATRA, which has raised many a eyebrows! Floated earlier by the
Congress in 1988, the small savings instrument KVP was suspended in
2011 after the recommendations of the Shymala Gopinath Committee, which
detected its misuse by black money mongers. So, for one, at a time
when PM Modi has been emphasising the repatriation
of the black money parked overseas, is it right to give a leeway to
the black money floating in domestic shores? Will it not give rise to another spate of black money spinning mafiadom inside the country?
The KVP was once discarded for the very fact that it had become a tool to ‘whiten’ the black money parked inside the country.The revived KVP scheme has only preliminary KYC for investment. Which means that it is not mandatory to verify either the buyer or the source of the money invested in a KVP or the subsequent transfer. It also is not mandatory to specify the transferee
or the person to whom the instrument is given. This means that any person
can literally buy ? 50,000 denomination single currency notes and give to it someone he/she wishes to oblige. Or better still, say 200 KVP of ?50,000 each to give a cool ?1 crore anywhere, anytime, anyplace, to anyone! Wow! I dont need to carry a suitcase full of 20,000 units of ? 500 currency notes anymore. Moreover, it is also assured of a capital appreciation since it carries an interest and an assured return that doubles the principal amount in 100 months.
On the other hand the votaries of Modinomics hold that it’s a very practical step by the government. Firstly, at time when the domestic savings rate has slipped down to a record low of 30 per cent and the government is on a binge for financial inclusion, the product fits the bill perfectly. Also, in the context of the surfacing of the domestically parked black money, the effort would go a long way in not only unearthing the source of the black money but also bring back the black money into circulation. The trail that it will leave will be used to
track down the offenders, a la Sherlock Holmes.