The annual report of the RBI released a few days ago is the last nail in the coffin of the failed demonetisation exercise. It has confirmed the worst fears that were expressed when the Prime Minister announced the demonetisation of Rs. 500 and Rs. 1000 notes at 8 pm on November 8, 2016. It was a bad idea, badly planned and badly executed. The original instruction issued by the RBI was amended repeatedly and the government did the same from time to time. By the end of the exercise, the goal post had been shifted so many times that the original objectives of the exercise were forgotten completely and new and spurious reasons were offered as justification for this move.
This is still being done.
The worst is that the RBI has not yet finished counting the notes, though almost 22 months have gone by since the announcement of demonetisation. Yet, its latest annual report states that 99.3% of the demonetized currency has come back to the RBI. Compared to the notes in circulation on November 8, 2016, the amount of demonetised currency not returned is only Rs. 10, 720. It is pertinent to point out here that the Indian currency in circulation in Nepal has not yet been accounted for. I understand on good authority that almost 1,000 crores is the officially admitted figure so far in Nepal and much more is in circulation in the far flung areas of the country, none of which has been counted yet. Even more shocking is the fact that demonetised notes deposited in the district branches of the central co-operative bank have not been accounted for. This includes therefore the amount of 745 crores which was deposited in the district co-operative bank of Ahmedabad within the first five days in which the President of BJP is a director. The RBI withdrew the facility of changing the notes in the district co-operative banks suddenly after five days, but only after old notes had been changed in the Ahmedabad branch. There are signs of a huge scam here.
In his stirring address to the nation on November 8, 2016, the Prime Minister had mentioned the evils our country was suffering from which he hoped to eradicate though the demonetisation exercise. These were corruption, black money and terrorism. At one point in his speech, he added fake currency also to the list and talked about the Hawala route which facilitated illegal trade in weapons. At another point in his speech, he described the whole exercise as a “fight against corruption, black money, fake notes and terrorism”. According to an analysis of his speech, the word “corruption’ was mentioned 16 times; the words “black money” 17 times; the word “fake notes” twice and the word: terrorism: 5 times. There was no mention even once of tax compliance or formalization of the economy. Both these have been added subsequently as an afterthought to justify the failed exercise.
With the return of 99.30% of the currency notes in circulation, the entire amount of black money in the system has been deposited with banks. The government in its affidavit in the Supreme Court, submitted by no less an authority than the Attorney General of India himself, had stated that it expected 3 to 4 lakh crores would not be returned. This statement and the case of the Ahmedabad district co-operative bank bring out clearly that the real aim of demonetisation was only to enable the “friends” of the government to convert their black money into white by bringing them into the banking system and second, to corner 3 to 4 lakh crore as windfall gain from this exercise, which it could use the way it liked. Corruption, black money, fake notes and terrorism were added only to spice up the exercise and make a fool of the people. Now, the Finance Minister is suggesting that the whole exercise was meant to make the people of the country more tax compliant. Can anything be more ridiculous? And what happened to the 2,000-rupee notes? Why have they disappeared and where are they stored and by whom?
The damage done to the economy through this foolish exercise is yet to be calculated, like all the notes are yet to be counted. Perhaps both these tasks would have to be done by the next government.
According to a World Bank report, the Indian economy declined by 7.3% in the first two months after demonetisation. The World Bank team used a novel method of looking at satellite pictures of India at night to see how many lights that used to burn before demonetization got extinguished after demonetization.
Why has the budgetary allocation for Mahatma Gandhi Rural Employment Guarantee scheme been increased now by 55,000 crores? And even that is insufficient to meet the wage bill of the scheme with arrears mounting up? The only reason for this is that workers from the small and medium enterprises throughout out the country lost their jobs after demonetization and went back to their villages. I know from personal experience as a former Lok Sabha MP that earlier there were few takers for MNREGA work; it was the last option of any wage earner. How come it has today become the only means of his survival?
Prime Minister Modi had said in a public meeting that he wanted only 50 days from the people of India (up to December 31) to achieve the objectives of the scheme. If it failed, he said he would appear before the people at any chowraha (public intersection) to take any punishment the people would determine for him.
Fortunately, we are still a democracy and believe in the rule of law. So Modi will not be judged by the people at a Chowraha; he will be judged by the people during the next Lok Sabha elections.
Yashwant Sinha, former BJP leader, was Minister of Finance (1998-2002) and Minister of External Affairs (2002-2004)