In the land of the Maharajahs: Cash is the real King!

This will prove to be one of the most eye-opening articles that you will read on the use of cash as a tool of evading tax in India! I would like to start by citing a few lines of former finance minister Arun Jaitley, from one of his budget speeches,” we are a largely tax non-compliant society”. It obviously makes it clear that a large part of the Indian population likes to transact in cash, be it paying or receiving.

To prove my point, I will give some examples:

• It doesn’t matter if you are paying the bill at a local electrical market, or at an upscale furniture store like Ikea, the queue for the cash-only counter is always at least 3 -To 4 times longer than the one for digital/card payments.

• Even in real estate transactions worth millions about 16 percent of people pay more than half the value of the home in cash. Almost every real estate transaction in the country involves a sizeable cash component!

You would expect these people to be very fearful of the taxman, however, anecdotal evidence suggests that the taxman and other law enforcers are hand in glove with these folks! Therefore, it’s no surprise that even after demonetization, the total cash component circulating in the economy is the same as it was before demonetization:14 %. I wonder what does it say about the moral compass of India’s citizens.