WHAT DID DEMONETIZATION ACHIEVE?

about 11 months ago
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Take a look at these two news, which appeared in today’s newspapers.

First  - RBI put out a report today stating that 99.3% of the total “black money” has been returned; this means Rs.15.31 lakh crore worth of currency notes came back v/s Rs.15.45 lakh crore notes which were in circulation have come back. So does this mean that this entire exercise of demon was done to prove that 0.7% or Rs.10,720 crore is what was “illegal?”

Second – SBI’s inhouse economists have stated that the promise of RBI that new currency notes of Rs 200 and Rs 500 (post demonetisation) are more secure and less prone to counterfeit is not entirely correct. The SBI study said there was a noticeable increase in counterfeit notes detected in the denomination of new Rs 500, up by 4,178%) and Rs 2,000, up 2,710%.

Thus based on RBI’s report of yesterday and SBI’s study, can we conclude that demon was a failure? If the objective of the exercise was to put an end to business of counterfeit notes and curb terrorism, especially in the Valley, can we say that it has failed miserably in its objective.

The Govt had made tall claims that at least Rs.3 lakh crore of old currency would not be returned to the system. Doesn’t that logic come to a complete naught? With only 0.7% money not coming back, what exactly did the Govt achieve? Maybe officiate move of black money legally for those in the power? Isn’t that what we all have suspected and murmured all along?

RBI said that, post-demonetisation, it spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and other denomination notes, more than double the Rs 3,421 crore spent in the previous year.  In 2017-18 (July 2017 to June 2018), it spent another Rs 4,912 crore on printing of currency.  Was that good money spent? Especially now with reports coming in of new notes also being counterfeited?

What is shocking is not that there was so much black money in the system; we always knew that. But what is baffling is how all this cash was laundered and it came back “white” and swanky to the banking system.

RBI too two years to finish counting too! Now that’s a record of sorts for a central bank. The only relief we have is that at least we now have a number.

The Govt is obviously treating this as a success as it feels the objectives have been met. We politely disagree. The fact on the ground is that cash is back to being the emperor. Yes, it has helped people to use plastic money and internet/mobile payment services but the majority of work still gets done in cash only. We still fail to understand why bigger denomination notes were introduced – Rs.500 and Rs.2000 when the objective was to curb black money. What happened to all the tall claims of making notes which will throw the counterfeiters into a tizzy? Well, it did throw them in a tizzy but they seem to have learnt the art – at least that is what SBI itself is stating.

Truly, we paid a big price on the growth front and the hurt is caused to innumerable small and medium sized businesses is huge; the number of people rendered jobless, leading to untold hardships was monumental. Yes, we have recovered but the question is – what did we achieve?

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