On 8th of November 2016, Prime Minister Modi had made an emotional pitch on demonetisation – “give me 50 days, then punish me if I am wrong.” Today who remembers that? Modi said this move is to curb black money and terrorism. None of which happened but Modi has moved on from ‘ache din’ to ‘new India’. Modi, however used demonetisation to reinvent himself as ‘messiah of poor’ and carried out UP electorate. He swept UP assembly polls.
Former Prime Minister Dr. Manmohan Singh had called demonetisation “an organised loot and legalised plunder”. He also said that the GDP of India will fall close to 2% and 10 months after Modi announced demonetisation, the RBI has come out with a report, which states that the country’s GDP is down to 5.7% in comparison to 7.1% last year.
RBI gained Rs. 16000 crore post demonetisation but lost Rs. 21000 crore in printing notes. RBI in its report suggested that banned notes worth Rs.15.28 trillion were returned to bank out of Rs.15.44 trillion, which means 99% of notes came back to the system, most holders of the old currency managed to dispose it, including those with black. Finance minister Arun Jaitley said that the fact that money has got into banking system does not mean that it is all legitimate, we are now involved in a large amount of data mining and large number of people are being questioned. The Finance ministry is currently probing 1.8 million bank accounts with suspicion of unaccounted money being deposited in their accounts during the period of demonetisation. The investigation may take up to years if not a decade.
On defending the demonetisation move the government had repeatedly said that it would curb terror financing and dent drug trafficking industry as they heavily rely on counterfeit notes. Even the Attorney General of India said in a statement to Supreme Court of India in November 2016 that 10-11 lakh crores will come back to banking system and the rest 4-5 lakh crores used in J&K and north east for causing disruption wont come back, but the fact is 99% of the demonetised currency came back to system, while Jammu & Kashmir is left out to burn in the hands of militants. RBI in its report also suggested that in financial year 2017 fake notes detected rose to 20% from the previous fiscal year. This time the government also felt the burnt in the form of dividend it received from RBI. RBI paid Rs 30,663 crore as dividend compared to Rs 65,880 crore a year ago.
Manufacturing industry grew by 1.2% in comparison to 10.7% last year. Unorganised sector was hit by 60-80 per cent and all of this happened because of squeezing the cash out the of the system, which further led to businesses taking hit as the country’s economy was largely cash driven. Finance minister Arun Jaitley said we intended to give a blow to black money and for that we needed tax base to be expanded, where as according to a report the tax base was growing 10 to 15 per cent every year. So, why was the entire exercise of demonetisation was carried out at all? Some people also say demonetisation was a conspiracy to help industrialists. But the question remains, was it worth it?