Published: Thu, August 30, 2018
Business | By Pearl Harrison

View: By a 99.3% verdict, demonetisation was a farce

View: By a 99.3% verdict, demonetisation was a farce

Over 21 months after Rs 500 and Rs 1,000 notes were withdrawn from circulation on November 8, 2016, the Reserve Bank of India (RBI) on Wednesday said that almost all of that money has returned to the banking system.

Reserve Bank of India (RBI) data says that circulation of Rs 2000 notes has seen a sharp fall in the past year.It is believed that the central bank is squeezing the supply of Rs 2000 notes to prevent black money hoarding the higher-value currency.

The Reserve Bank of India finally revealed the quantum of notes that have returned into the system post the Demonetization. An amount of Rs 107 billion has not yet been received by the RBI after the cash ban, the report said.

The "humungous task of processing and verification of specified bank notes (SBNs) was successfully achieved", it said.

In a series of tweets, Chidambaram said every rupee of the Rs 15.42 lakh crore - barring a small sum of Ra 13,000 crore - has come back to the RBI. "In consonance, the use of digital payments, which had surged to a peak in December 2016 in the aftermath of demonetisation, fell back to the elevated post-demonetisation trend before rising in recent months", the RBI notes. "If that was the objective then yes, it has failed because Rs 13,000 crore is the amount, which is possibly held outside the country in nations such as Nepal, Bhutan, Bangladesh, Burma who simply did not have the facility to exchange the currency", the news channel reported Sen as saying.

Now, even if 100% of demonetised currency returned to the system, it does not mean all of this cash was "white" or money that was generated through wholly legal means. Thousands of SME units were shut down. Crores of daily wage earners lost their jobs and the country lost 1.5 pc of GDP growth that translates into Rs 2.25 lakh crore per year, he claimed.

"... India's currency to GDP ratio moved up to 10.9 per cent in 2017- 18, returning to being amongst the highest levels of currency usage in peer emerging market economies (EMEs) and advanced economies (AEs) as well".

In August 2017, while defending demonetisation, the government had said that close to Rs 3 lakh crore, which was earlier not part of the banking system, had been deposited in banks.

The party said the return of nearly all the junked notes meant that the government had failed to unearth any black money, check terror financing and eradicate fake currency as promised by Modi while announcing noteban. Meanwhile, the central bank may soon come up with varnished notes to increase their lifespan, which would not only reduce replacement requirement but would also save the central bank from security printing expenditure. Experts say, that having a large number of Rs 2000 notes in circulation would have defeated the goal of demonetisation, which was to stop circulation of black money. Over five lakh shell companies were closed down, he said.

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