The cover-up

If 99 per cent of the demonetised currency has returned to the banks, as the RBI has said, it means the fight against black money through demonetisation was not properly thought through. The Prime Minister had declared then: “The Rs 500 and Rs 1,000 notes hoarded by anti-national and anti-social elements will become worthless bits of paper.” That has not happened. This “anti-rich idea”, the “surgical strike” on black money, was successfully marketed by the BJP in the UP and other state elections. The Finance Minister had claimed that Rs 3 lakh crore of black money would get extinguished. Instead just Rs 1,600 crore has not re-entered the banking system.

The Finance Minister’s claim on the country making digital gains is also untenable. Digital transactions, according to the RBI, fell 20 per cent this April, compared to the previous month. To cover up the embarrassment, Arun Jaitley has changed the narrative: The demonetisation objective was to force unaccounted money out of the cupboards and vaults at homes into bank accounts so that tax officials could establish the money trail. His assertion that personal income tax collections have gone up 25 per cent post-demonetisation is also open to question. Official tax data indicates the I-T collection rise was higher at 27 per cent a year before. Any fight against black money would be incomplete without first tackling the issues of political funding, benami properties and offshore investments. 

The exercise of extinguishing 86 per cent of the nation’s currency had caused countrywide dislocation and loss of jobs in the unorganised sector, hurt farmer incomes and led to a growth slowdown and some 104 deaths. The RBI ended up spending over Rs 30,000 crore on the printing of new notes and managing the logistics of demonetisation. It spent 132.8 per cent more on printing new notes — Rs 7,965 crore during 2016-17 compared to Rs 3,421 crore in the preceding year. Here is an institution that compromised its autonomy, put itself to loss and invited criticism for the shoddy currency replacement work. The inescapable conclusion is: the pain of demonetisation was real, the gain remains intangible.