Noted economists, financial experts, political leaders other than from the saffron stable and many media analysts had said it – demonetization will spell doom for the economy. But the ruling dispensation parroted what their leader, in his address to the nation on the night of November 8, 2016, said: This is a mahayajna against black money, fake notes and terrorism. The Reserve Bank of India’s annual report published on August 30 confirms what experts feared. The ‘mahayajna’ has failed to achieve its goals. Every objective spelled out by the Prime Minister has fallen flat.
The RBI figures confirm that 99 percent of the demonetized notes have come back to its coffers. This means that of Rs. 15. 4 lakh crore demonetized notes, a meagre Rs. 16,000 crore remain out of the banking system. Hence the single most important objective of getting rid of a huge amount of black money failed miserably. The reappearance of fake currencies of new notes portends what is in store about the second objective. The increased terrorist activities in Jammu and Kashmir and other areas tell the story of the failure of the third objective. The government started talking about objectives other than the ones spelled out by the Prime Minister is an admission of the failure of the momentous decision. The government changed the goalposts to save its face.
A close look at the government’s new claims exposes its hollowness. The government states that about 2 lakh shell company accounts have been frozen. It maintains that several lakh notices have been issued to those deposited ‘excess’ money in banks. But such claims will remain mere claims till they are decided by the tax tribunals and courts. Going by the record of settlement of such cases, it takes years to reach a conclusion. Also, in majority of cases, the tax authorities fail to establish that the money is ‘black’ and the issue is settled in favour of the holders of money.
The government highlights the number of new tax payers as another gain. But, there are discrepancies in the figures put out by various agencies. While the Finance Minister said there are 91 lakh new tax payers, the Central Board of Taxes peg the figure at 56 lakhs. The Economic Survey says the number of new tax payers is 5.4 lakhs and the income declared by them is a mere Rs. 10, 587 crore. Is it the gain the government trumpets from rooftops? It is interesting to note that printing of new currency to replace the old ones alone cost the government around Rs. 9,000 crore.
The proponents of the derailed demonetization have come out with new spins and theories. The ground reality is that millions of people who have generated not a single penny as black money were put to untold hardships. A large number of jobs were lost; businesses suffered heavily; several million man-hours were spent standing in queues; many died in the process; family functions like marriages could not take place…. The list of agonies and heartbreaks is long. On the contrary, the well-off hardly suffered. Many of them might have even converted their black money into white. Noted economist Kaushik Basu puts it succinctly: “India is paying hefty price for demonetization.”(Published on 11th September 2017, Volume XXIX, Issue 37)