DEMONETISATION IS A FLOP SHOW

The verdict is out. In the next three months, the government’s Great Demonetisation Drive completes two years. And the country’s top bank has made a startling fact that almost all (99.3%) of the 15.4 trillion rupees high currency notes sucked out of circulation have been returned. The Reserve Bank of India report is a damning censure of the ill-conceived government move, which was touted as the panacea for all the ills, affecting the economy as well as the country’s internal security.

The RBI disclosure punctures the government’s several claims. During the abrupt November 8, 2016 address to the nation, Prime Minister Narendra Modi had compared demonetization to a “mahayagna”, saying it would purify the country from corruption, black money, fake notes and terrorism. 

 The government made people to believe that with one stroke the corruption will be wiped out from the country. Has it? With almost all of the so-called Black Money back in the system, the claim flies in the face of the government. Last year, the Transparency International report dubbed India as the most corrupt Asian country. With a bribery rate of 69 per cent, India led the dubious list leaving behind even Pakistan.

The government invalidated 500 and 1000 rupee notes on the surmise that the large denomination currency notes were being used to stockpile black money and evade tax. If one buys the government theory, then it defies all logic when it introduced even a bigger currency note of Rs 2,000. Which is the larger denomination currency – a 1,000 rupee currency note or a 2,000 rupee currency note? Won’t it be easier to stash black money in the form of 2,000 rupee notes than the 1,000 rupee notes? 

Therefore, the government’s reasoning was far from the truth. One can draw only two plausible conclusions behind this exercise. Either the government was ill-advised or it was a deliberate attempt to convert the alleged black money into white.

Did the new colourful but highly deceptive (some even compared the new currency notes with ‘churan wali pudiya notes) currency notes make any dent on the fake currency notes as was claimed then? The fake new currency notes continue to be printed across the border and smuggled into India as several government agencies have seized them from time to time. With regard to terrorism, the less said the better. The terrorism related incidents have only spiked in Kashmir since then.

The RBI disclosure is also a big setback as the government had sniffed windfall gains expecting that between 2 to 3 lakh crore rupees would never return to the banking system. To the contrary, the so-called black money, on which the government had planned surgical strike, became legit. This raises a serious question on the intent of the government. With so much hidden money back into the system, the banks will now be bound to pay interest on the money parked with them. In effect, the cash lying idle at people’s homes has also started earning interest.

In a nutshell, the move to demonetize higher currency notes does not seem to have the desired results as the government had tom-tommed. The country is still struggling to come out of the shock which has caused more pain than gain.