manoj-k-sahooPrashantBy Manoj K Sahoo and Prashanta C. Panda* in   Ahmadabad, December 5, 2016 : The demonetization and withdrawal of 500 and 1000 denomination notes on November 8, 2016 by PM Narendra Modi has passed through many ups and downs. This was evident from frequent changes in norms and rules, long serpentine queues, national divide on the issue, hue and cry against the administrative unpreparedness in the Parliament and disruption in parliamentary activities on the issue of people’s death and immense hardships faced on accessing their own money from the banks.

Amidst all this however, one significant phenomenon came to the fore that is the symbiotic meet of Kaala Dhan and Jan Dhan! The present government’s 2014 parliamentary election promise was to bring Kalaa Dhan or black money from abroad which is stashed in Swiss and other banks.

The Government has in fact taken a number of measures like setting up of the Special Investigation Team (SIT), enactment of a new legislation- ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’ and “one-time three months’ compliance window”. Besides, the present government also put in place the policy framework, information sharing network and data mining through increasing use of information technology and rejuvenating the administrative mechanism for it.

These initiatives have paid off also. The new window 648 declarations related to undisclosed foreign assets were made by Indians worth Rs 4,164 crore and a total revenue of Rs 2,476 crore was collected by way of tax and penalty. Moreover, regular estimates of Indian money in Swiss banks are also coming out. In 2014, Indians’ money held in Swiss banks was put at 1776 million Swiss francs (INR 12,000 crore) against 1207 million Swiss francs (INR 7,200 crore) in 2015 (Economic Times, Nov 23, 2016). Government’s crackdown may have led to fall to about one-third in the stashing of money in Swiss banks – which has been a trend in recent years.

incomtax1Apart from this the Income Declaration Scheme (IDS), 2016 window for Indians for domestic assets was also launched this year which mopped up an overall declaration of Rs. 65, 250 crore from 64,275 declarations averaging Rs. 1 crore per declaration by October 2016. Out of this, government expects to pocket Rs. 29,000 crore @45% tax and penalty out of it. (The Hindu, Oct 1, 2016)

On November 22, India and Switzerland signed an Agreement for automatic information exchange on monetary transactions with Swiss banks, under which India would be able to access this information after September 2019, for transaction September 2018 onwards. This was again a historic step, notwithstanding the fact that it has also its loopholes about the September 2018 status and accessing information post 2019. This will provide ample scope and time to the black hoarders to divert their assets to elsewhere like to the havens in Lichtenstein, Mauritius and so on.

When India was taking these steps on the fight against black money, the demonetisation drive had gone on to a new platform where the Kaala Dhan and Jan dhan were meeting together to beat the blues of demonetisation. The option provided by the deposit cap of Rs. 2.5 lakhs in an account without tax or penalty in the demonetisation rules had suddenly rendered the dead and penniless Jan Dhan Accounts attractive.

As per Ministry of Finance, GoI data (see Table 1) there were 25.78 crores Jan Dhan accounts as on 30th November 2016, out of which about 23% were zero balance accounts. Jan Dhan Accounts were opened to provide financial inclusion to the poor and financially excluded with zero balance norms through a massive drive since August 15, 2014. All of these Jan Dhan accounts had accumulated a total deposit of more than Rs. 74,321 crore as on end of Nov. 2016.

A week back (as on 23 Nov 2016), the balance in the Jan Dhan account was Rs. 72,834.72 crore (USD 11 billion) and as on Nov 16, 2016 it was Rs. 64,252.15 crore in 25.58 crore JD accounts (PMJDY). As on November 16, 25.58 crore accounts with aggregate deposits of Rs 64,252.15 crore have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) across the country,” As on November 16, 25.58 crore accounts with aggregate deposits of Rs 64,252.15 crore have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) across the country,” As on November 16, 25.58 crore accounts with aggregate deposits of Rs 64,252.15 crore have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) across the country.

Five months back, by 1 June 2016, in over 22 crore Jan Dhan accounts there was Rs. 38,411 crore (USD 5.7 billion) balance, which was 51.7% of the latest balance (PMJDY). What is significant however is the rise in Jan Dhan deposits since announcement of demonetisation- a hefty more than Rs. 27,000 crore (USD 4 billion) between 9- 23 November 2016. (ET, 23 Nov 2016) This is staggering! About 59% of amount deposited in Jan Dhan accounts since launch of the scheme during more than 2 years, 2 months and 3 weeks till November 8th 2016, got deposited in just 14 days!

Bank Name Public Sector Bank Regional Rural Bank Private Banks Total

Table 1:  Pradhan Mantri Jan -Dhan Yojana Accounts Opened

as on 30 Nov. 2016

                                                                                                           (All Figures in Crores)

Rural Urban


No. of Rupay Cards Aadhaar Seeded Balance In Accounts % of Zero-Balance Accounts
11.44 9.07 20.51 15.6 11.51 57939.75 22.93
3.79 0.62 4.41 2.95 2.07 13682.12 20.1
0.52 0.34 0.86 0.81 0.37 2699.69 34.92
15.75 10.03 25.78 19.36 13.95 74,321.55 22.85

Source: PMJDY, Ministry of Finance, GoI, at

So, this sudden swelling of funds in the dead and zero balance accounts caught attention of all- government, RBI, IT sleuths, economists, bankers, policy makers and so on. It was clear- that a good component of black money was getting converted into white in the form of Jan Dhan deposits. Few cases were reported also in the media. And there was all sorts of announcements in the aftermath, like possibility of examining withdrawal from these accounts and source of these funds to freezing of these sums for a certain lock in period to even the PM telling the account holders not to budge under pressure from the proxy illicit depositors and not to withdraw the sum from these accounts.

Jan Dhan deposits came up as a surprising innovation of the black money hoarders to beat the government step to curb black money from the system. And the Central government was well under fire with lots of criticism from different quarters, as the administrative unpreparedness had led to complete chaos in the banking system and had become a source of pain to the common man and poor to access their own money.

File photo of a money lender counting Indian rupee currency notes at his shop in AhmedabadBut the rich and black money holders had easily became successful in converting the black money into white- through cash coolies-queueing proxy men on lines to deposit cash to renting a JD account with a commission etc. Government had targeted to mop up at least Rs.10 lakh crore through the demonetisation scheme into the banking system and to render as useless the balance of nearly Rs.4 lakh crore of black money in cash which may not be disclosed and may not come to the banking system, as per affidavit sublitted to Supreme Court. Total 500 and 1000 currency value as on March 2016 was put at about Rs. 14.2 lakh crore and if we include all bank notes it comes to Rs. 16.4 lakh crore.

But as the indication goes, by 27 November 2016, old denomination deposits had already crossed half way mark- Rs.8.44 lakh crore in deposits and exchange and Rs.2.16 lakh crore were withdrawn from ATMs and accounts. (RBI data, 28 Nov 2016) That’s a deposit of Rs. 46, 889 crore per day in the first 18 days of demonetisation! And by end of December 2016, it may well cross government’s target of Rs. 10 lakh crore!

If it crosses substantially more than the Rs.10 lakh crore figure, then the government will be in trouble! The claim of rendering black cash as useless by the demonetisation move, for providing a case for demonetisation, will be defeated. Also it will be clear that a significantly small component of cash is actually held in the form of cash! As per I-T raids data, only 5 to 6% of unaccounted assets are actually in the form of cash hoardings and rest is converted into physical and financial assets like land, property, foreign currency and stock market investments. This will be only Rs. 71,000-85,200 crore of the total 500 and 1000 notes in circulation!

So, if we believe World Bank data, in 2007, the black economy in India was at 23.2% of GDP. Even if we take a conservative estimate of 20% of GDP as black, it will put it at one fifth of Rs. 135 lakh crore annual economic size- that is a hefty Rs. 27 lakh crore in 2016! What will happen to the rest assets? How the government is going to tap the other non-cash assets? There seems no idea with the government at present.

Next two three weeks are going to be crucial for the government. Jan Dhan accounts have already shown that because of twisting of rules untaxed money are only accumulated in them. Now PM Modi has promised to distribute a chunk of post tax revenue earning from the unaccounted sum to the poor. If this happens, say if he deposits Rs. 10,000 in each of these 25.78 crore Jan Dhan accounts, it will require Rs. 2,57,800 crore! This is well within his target of rendering Rs. 3-4 lakh crore of black money useless and transferring this as RBI’s profit or government’s dividend. Provided, government is able to tap this sum!

But Jan Dhan account may play spoilsport in government’s fun! Either Jan gets Dhan or it’s Kaala Dhan’s fun with Jan Dhan! Two to Tango!!

*(The authors Manoj Kumar Sahoo and Prashanta C. Panda are at faculty of Economics with School of Liberal Studies, Pandit Deendayal Petroleum University, Gandhinagar)

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2 Comments on "Kaala Dhan – Aam  Janta Ka Dhan: A New Life to Jan Dhan Yojana !"

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very nice information

Sudhakar Panda

A very illuminating analysis