New Delhi: If experts are to be be believed, PM Narendra Modi is walking a tightrope with his fight against black money.
The pivotal factor here is that he has unleashed a wave of bold, and sometimes brazen, initiatives to root out income that has been illegally obtained or not declared to the taxman. But that has chilled the economy.
In the last year or so, Indian government focus has shifted from elite corruption to dealing with the next layer down: ordinary taxpayers. The country has more citizens who go overseas on holiday than taxpayers who declare income of more than 1 million rupees.
PM has done plenty of things in order to force a change in collections. A controversial ban on big banknotes last year made people less comfortable hoarding undeclared cash. A new nationwide “goods and services tax” (GST) is based on electronic invoices, forcing small traders to enter the formal economy to claim back tax credits. New real-estate regulations mean it is harder to park illicit cash in property.
In order to support the economy and square the funding circle, Indian Government is now considering relaxing the fiscal deficit target from 3.2 percent. Low inflation, a narrow current-account deficit, and large foreign-exchange reserves would make a limited adjustment manageable.