If 99 per cent of scrapped notes came back to RBI, what exactly was the point of demonetisation?
The annual report of Reserve Bank of India for the financial year 2016-17 is finally out and the figures it puts forward officially busts each and every claim made by the Modi government at every step since the demonetisation diktat of November 8, 2016.
In fact, various Union cabinet members, including finance minister Arun Jaitley and Prime Minister Narendra Modi, can now be held guilty of misleading the country in Parliament by making spurious and now decidedly discredited claims about the notebandi move, in which the Rs 1,000 and Rs 500 currency notes were invalidated overnight, sucking out 86 per cent of the liquid currency from the system.
The RBI report clearly shows that almost 99 per cent of the demonetised currency came back to the central bank, and of the Rs 15.44 lakh crore withdrawn with the scrapping of Rs 500 and Rs 1,000 notes, Rs 15.28 lakh crore are back with the central bank.
According to a Business Standard report, the cost of demonetisaion was as much as the notes that didn’t come back, at Rs 7,965 crore spent of printing new currency notes in 2016-17, while the Rs 1,000 notes that didn’t come back into the system comprised about Rs 8,900 crore, or 89 units of the demonetised Rs 1,000 notes.
Twitter activist and a well-known number cruncher James Wilson attributes this figure to notes lost in Nepal, Bhutan and other neighbouring countries, saying that the data was only till March 31, 2017, and leaves the window open for the number to fall further because NRIs could return demonetised notes till June 30, 2017.
Similarly, media articles that the RBI annual report would be furnishing expected figures from the demonetisation critics, have been doing the rounds from August 27, and the question “Where is the black money?” which PM Modi made great claims to have eradicated, has been asked again and again.
In fact, it’s being pointed out that eminent economists who batted for demonetisation as a masterstroke to eliminate black money and fake currency, as well as introduce India to a digital currency system, especially the likes of Professor Jagdish Bhagwati, Arvind Panagariya, et al, have been proven thoroughly wrong in the wake of the RBI’s annual report.
Here, we give you the graphs from the RBI annual report which lays the bare the demonetisation numbers.
Some of the takeaways from the RBI annual report on demonetisation are as follows:
A) 89 million units of Rs 1000 notes were in circulation at the end of March 31, 2017, compared to 6.3 billion units on March 31, 2016.
B) RBI printed 3.5 billion notes of Rs 2,000 and 7.2 billion of the new Rs 500 in 2016-17.
C) Overall, the number of currency notes supplied in 2016-17 amounted to 29 billion compared to 21.2 billion pieces a year ago.
D) RBI spent Rs 7,965 crore in printing currency notes in 2016-17 compared to about half the amount in Rs 3,420 crore spent a year ago.
E) RBI detected 199 counterfeit notes of the new Rs 500 denomination and 638 of Rs 2,000 notes. But these were a minuscule proportion of the 762,072 fake note pieces detected during that year, an increase compared to 632,926 pieces a year ago.
Essentially, even the new notes have had fake currency in them; fake currency wasn’t eliminated through demonetisation; and tall claims on black money proved to be completely hollow. In other words, demonetisation was a disastrous shock for the economy, and it was completely needless but for the political windfall that the ruling BJP made out of it, securing moral and political narrative around it.
We need to ask who is responsible for the 120-plus deaths that resulted from the serpentine ATM queues after notebandi diktat, the anxiety and panic attacks that the middle and working classes went through post demonetisation.
Of course, the report has been used to slay the ruling regime on Twitter. Journalists, Opposition, Twitter activists have been rebuking the government for pulling a fast one on the country.
However, finance minister Arun Jaitley tried “explaining” the government claims on the “expanded tax net” in the following press address on RBI Annual report 2016-17.
Unfortunately, most of FM Jaitley’s claims were rehashed from his earlier stances on demonetisation’s impact on widening the tax net, which have already been discredited.
An analysis published as recently as on August 16, says: “Despite government press releases, as of August 2017, there doesn’t appear to have been a substantial increase in the number of new tax payers or direct tax collection as a result of demonetisation.” Essentially, PM Modi and FM Jaitley, as well as RBI Governor Urjit Patel, have a lot of explaining to do.
Also read - Is India prepared for demonetisation 2.0?