The Myth of Black Money Being Hit Returns to Haunt the Regime

Demonetisation continues to haunt the regime. Serious questions of the Modi government’s claims on this move that severely damagaed India’s economy have come to light. Especially the hyped claims on how the peremptory note ban had destroyed black money in India.

Recently released data from the Reserve Bank of India (RBI) shows that almost 99% of the banned 1000-rupee notes actually made their way back to the RBI. This means that either black wealth held in these notes was successfully manipulated back in to the legal system or such black money was not being held in 1000-rupee notes. Either way, the govt.’s move of demonetisation or note-bandi has come a cropper.

At the Modi regime’s direction, the RBI had declared 500-rupee and 1000-rupee notes illegal on 8 November 2016. Prime Minister Modi had personally gone on air and dscribed it as a historic strike against illegal wealth. A few days later he had claimed in emotion choked voice that he was willing to accept any punishment if it turned out that this move was a failure.

What a spectacular failure the ill-thought out move has turned out to be. The government is adamant in its refusal to reveal the details of how much money in banned notes was deposited back with the RBI although 8 months have passed since the window of exchange closed in January this year. Despite repeated questioning in Parliament, by the Parliamentary Committee, in the Supreme Court and through RTIs, the govt. and RBI has doggedly maintained that old banned notes were still being counted. In June this year, finance minister ArunJaitley claimed that each note was being checked whether it was counterfeit and that the process would take “a long time”.

Now the truth emerges, albeit slowly. Analysis of data recently released by the RBI shows that when financial year 2016-17 ended on 31 March 2017, there were Rs. 8925 cr worth of 1000-rupee notes still in circulation. This means that these are the notes that were not deposited with the banks after note-bandi.

How many total 1000-rupee notes were there in circulation on 8 November 2016? According to a statement made by Santosh Kumar Gangwar, minister of state for finance, in the LokSabha on 3 February 2017, 6858 million pieces of 1000-rupee notes were in circulation on 8 November. The value of these notes works out to Rs. 6.86 lakh cr.

So, out of Rs.6.86 lakh cr, just Rs.8925 cr is unreturned. That is a mere 1.3% of the total. The overwhelming balance of 98.96% of 1000-rupee notes is back in the RBI coffers.

The total value of demonetised currency on 8 November 2016 was Rs.15.44 lakh cr. Of this, 1000-rupee notes made up about 44% and 500-rupee notes 56% approximately.

Similar calculation cannot be done for 500-rupee notes because unlike the 1000-rupee notes, new 500-rupee notes were printed and circulated in parallel to withdrawal of old ones. So, figures of 500-rupee notes in circulation on 31 March 2017 are mostly for new notes.

Experts say that what goes for 1000-rupee notes is equally applicable for 500-rupee notes. Although data is not released but in all probability 98-99% of 500-rupee notes must also have come back.Former JNU professor of economics Arun Kumar, in an analysis published in EPW in June, has suggested that 98.8% of all banned currency was deposited back with RBI.

In other words, no black money was unearthed by Modi’s ‘historic’ move.. As has been shown earlier, terrorism has also not gone down after demonetization and neither has circulation of counterfeit currency. So, it was a failure on all counts, a point that has been predicted by economists worldwide.The only people who benefited from the note bandi were companies that own digital payment systems (like PayTM, MobiKwik etc.) and credit card companies.

It also seems now that ultimately, the black money owners have benefited because they managed to convert all their black wealth in to white using proxies.
When will the political opposition be able to creatively convey these facts to the populace during the ultimate game of electoral politics—the game for votes???



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