When a deposit regulation passed by Congress restricted people’s wealth

What would it feel like to have your hard-earned money sequestered? when all of the money is simply numbers and you lack the ability to access or use it? The process of demonetization in 2018 provided a brief indication of this. But throughout the Congress regimes in the 1960s and 1970s, there was a mandatory deposit program that required citizens to give up their hard-earned money for up to five years. For years, that money remained locked up and unavailable for use.

The politics of the 2024 Lok Sabha election have brought back memories of the days when people’s money would be forcibly taken away from them.

With a clear reference to the Muslim population, Prime Minister Narendra Modi caused a political uproar when he said that the Congress will divide the country’s riches between “infiltrators” and “those who have more children” in accordance with its plan. The claims have since been repeated by the prime minister at several more electoral rallies.

The issue began when Rahul Gandhi said that if the Congress was elected to power, it would first carry out a financial census to determine who owned the nation’s wealth and then carry out a redistribution operation. Chief of the Indian Overseas Congress Sam Pitroda fanned the flames by proposing an inheritance tax in India that would resemble the one in the US.

In the midst of the political uproar, a number of social media users and BJP officials have brought attention to a program that the Congress put into place in 1963 and 1974 that required taxpayers to deposit a certain percentage of their income on a three- to five-year term.

The law, which went by the name Compulsory Deposit Scheme (CDS), was put into effect “in the interest of national economic development.”.

About the Congress’s proposal to redistribute wealth, Prime Minister Narendra Modi is absolutely correct. Congress will do it once again, having already done it twice. BJP spokesman Suresh Nakhua said on X, “It’s the same party that twice forced people to part with a significant portion of their salaries, in 1963 and 1974.”

It should be mentioned that the Congress’s platform for the 2024 election makes no mention of any such plan. The deposits were refunded during the lock-in periods and were not shared among the minority, not even in 1963 and 1974.

People’s curiosity has been aroused by the rather unusual program, which hid people’s hard-earned money from them.

Describe the mandatory deposit scheme.
Morarji Desai, the finance minister at the time, originally proposed the Compulsory Deposit Scheme bill in the Union Budget in 1963. Following the first national emergency that was proclaimed in 1962 during the India-China War, the Act was introduced.

Desai introduced the bill and said, “We have to undertake this somewhat novel and unorthodox scheme of compulsory deposit in light of the situation created by the Emergency.”

In addition to encouraging a “saving habit in the country,” Desai said the program would “restrain demand in the immediate future.”

All citizens and workers of the Indian government, as well as taxpayers and property owners, were covered by the program. The deposits were repayable after five years and carried an annual interest rate of 4%.

For instance, people were required to deposit half of the money they made from using the property. Owners of real estate in cities were required to deposit three percent of the property’s yearly rental income.

Additionally, workers of the federal and state governments were required to deposit three percent of their yearly salary.

For taxpayers with residual income of Rs 6,000 or less, the rate remained the same. Higher earners were required to deposit 2% of the remaining amount or 3% of the first Rs 6,000, whichever was smaller.

Those who neglected to make the deposits also faced heavy fines.

Scheme Reinstituted in 1974
The laws were once again put into effect in 1974, one year prior to Prime Minister Indira Gandhi’s declaration of emergency. The government’s principal economic advisor was Manmohan Singh.

The bill was met with strong resistance when it was passed, and inflation was at an all-time high of 28.6%. The economy was still feeling the consequences of India and Pakistan’s 1971 Bangladesh Liberation War.

The deposit rates were set between 4% and 18% of individual earnings in the 1974 version of the law. This time, the program also applied to agricultural revenues.

Individuals who earned between Rs 15,000 and Rs 25,000 were required to deposit 4% of their take-home pay. Individuals who made more than Rs 70,000 were required to deposit Rs 7,100 plus 18% of the whole money that they made over Rs 70,000.

In case of nonpayment, there was a penalty equivalent to 25% of the mandatory deposit.

The mandatory deposit program was very unpopular. In its electoral platform, the Congress pledged to do away with the mandatory deposit program for taxpayers before to the 1984 Lok Sabha elections.

strategy for transfer of wealth
Due to the high rates of inflation at that time, former economic adviser Sanjeev Sanyal referred to the Congress’s mandatory deposit program as “draconian” in a 2020 post on X.

“By any measure, this was harsh given the high rates of inflation at the period… The initiatives between 1963 and 1974 really amounted to expropriation, considering the rates of inflation at the time,” he remarked.

Sanjeev Sanyal used the term “expropriation” to describe the Congress plan, which refers to the state seizing property from its owner for public use.

Even though the Congress left out of any such plan in its Lok Sabha agenda for 2024, the political debate over wealth distribution has revived memories of the mandatory deposit program, which saw some people’s money sequestered.