Published: Sat, September 02, 2017
Worldwide | By Sean Reid

Did demonetisation really attack black money?

Did demonetisation really attack black money?

"We had an idea that the bulk of the money would come back but the present 99 percent is a surprise for most of us", he said.

The publication of the RBI report has, however, given ammunition to Mr Modi's critics, particularly since demonetisation and the ensuing lack of cash imposed severe hardship upon most Indians. After the note ban exercise, he had told India Today in an interview: "It is a enormous mistake, both in terms of its objective of dealing with corruption as well as the objective of one rapid jump of getting into a cashless economy". Along with new Rs 500 and Rs 2000, Government also printed new Rs 200 notes.

Questions are being raised about the economic rationale and the success of the demonetisation drive announced by Prime Minister Narendra Modi on November 8 past year.

Finance Minister Arun Jaitley today said the fallout of demonetisation was on predicted lines and the economy will benefit in medium and long term.

However, the Modi government changed its goal posts and said the demonetization was aimed to make India shift from cash economy to digital economy. "Was demonetisation a scheme created to convert black money into white?", Chidambaram said on Twitter.

"To end the use of cash?"

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He also said that the demonetisation scam not only dented institutional sanctity of the RBI but also the credibility of India overseas and demanded an apology from the prime minister. "Demonetisation was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail", he had said. Since after the ban it was the Central government's and central bank's responsibility to release the figures as to how many notes were submitted to the bank. The central bank said on Wednesday that the value of the notes (500 and 1,000 rupees) that Prime Minister Narendra Modi had banned on 8 Nov 2016, has come back to the central bank.

Sharma also said Modi made a false statement on August 15 that out of the money which has come back, Rs three lakh crore was black money.

It is also pertinent to mention here that the Rs 15.28 lakh crore in demonetised notes that the RBI claims was back in the banking system is still a provisional figure. Holders of old notes were given a 50-day window to deposit them in banks.

We can not be certain if indeed the note-ban troubled the black money riches against whom it was devised, but we know for sure that common people went through hell (sometimes, even death) and may still fall victim to the risk of "inspector raj" as government will try to push up its tax collections by all means. "Why were people imposed with a burden of printing new notes costing Rs 8,000 crore and ATM recalibration cost of over Rs 35,000 crore in addition to the loss of economic activity estimated by the CMIE and others to the tune of Rs 1,50,000 crores?" he asked.

Senior journalist MK Venu points out: "The finance minister had claimed in November that going by past experience about 15-20 per cent of the demonetised currency, roughly Rs 3 lakh crore, was likely to get extinguished and would not return to the system".

According to the report issued by the RBI, for the financial year, 2016-17 now total of 3285 million notes of 2000 are in circulation, worth the value of 6571 billion rupees and 5882 million notes of 500 are in circulation worth the value of 2941 billion rupees.

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