It’s one year since the Modi government demonetised over 86% of the currency in circulation by rendering notes of 500 and 1,000 non legal tender. PM Modi himself broke the news on November 8, 2016 on a national channel.
He made it out to be a war against black money, counterfeiting and funding of terrorist activities. Some weeks later, Modi government began shifting the goalposts by saying it was also undertake to reduce cash and encourage a cashless society!
The government began putting more and more restrictions on the facility of exchange of old notes and press for digitisation at the same time. It began to emerge that the government was less than sincere on the motives when it went for demonetisation. First of all, none of the objectives stated initially have been met and unlikely to be met. Secondly, the real motive for resorting to a desperate move like DeMo has started becoming clearer now.
With over 99% of the demonetised currency coming back into the system as per RBI’s own admission, it is plain as daylight that DeMon was a dismal failure. However, it is also evident that most of the black money held in cash has come back into the system and been legitimised by this move.
In other words, the Modi government has wittingly or unwittingly allowed a huge amount of unaccounted money to be legitimised. Economists estimate that upto one lakh crores could have been converted into white by depositing into the banking system.
One year after demonisation, the writing on the wall is clear. Besides causing huge distress to the informal sector and job losses in millions and tremendous pain to farmers who had to sell their produce at throwaway prices and contracted industrial and agricultural growth. Further pain may be on the way in the coming quarters.
DeMo has helped the big fish including corrupt bureaucrats, crony capitalists and political parties and politicians to convert their ill-gotten gains into white money. At what cost? Nearly 2% has been shaved off the GDP growth in the last two quarters! Who will bear accountability for this man-made disaster?
Was that perhaps the real motive of demonetisation? To facilitate conversion of black money into white? Who knows? But one day the truth will be out. Hopefully, sooner than later!
