Why Demonetisation May Not Even Bring Back Black Money

Posted by Vibhor Sharma
December 7, 2016

It has almost been a month since the so-called biggest reform intended to eradicate roots of every evil in society – black money, counterfeit currency, terrorism and other unlawful activities, and its effects have started to show up, though in a negative way. Each passing day has been adding to the nation’s woes. Standing in long queues for hours, watching your own child dying, carrying dead parents in your arms – doesn’t it compel the government to dig deep down and introspect what went wrong? Was it the policy or its implementation? Or some other motive? Time will surely convey the actual result but some trends have indicated what the future holds for us and this reform.

Unaccounted money was supposed to be the biggest benefit but RBI figures tell another story. It was expected that out of a total Rs. 15.44 lakh crore, quantum of money not to be deposited will range somewhere between Rs. 3 lakh crore – Rs. 5 lakh crore. As per the RBI weekly data report, Rs.8.45 lakh crore has already been deposited between November 10 – 27. If we further add cash, every bank is required to deposit with RBI, of course in high-value denominations, the tally rises to Rs. 12.50 lakh crore. Adding the cash in hand with the bank as on November 8, the total deposit figure in old notes comes at Rs. 13 lakh crore. There is still a month to go for the 50-day deadline to end and we are just Rs. 2.44 lakh crore short of the finish line. Seems like India never had black money or maybe will have more than expected white money.

50 days is what the PM demanded to fulfill our dream of ‘shining India’. Are 50 days enough? Or was it another ‘jumbla’ (scam)? 2402.3 crore pieces of old notes were already in circulation. This move intends to inject 1716.5 crore of Rs. 500 denomination and 342.9 crore of Rs.2000 denomination new notes. Our 4 printing presses, at 100% capacity, can print 5.5 crore pieces per day. At least 374 days will be required to bring normality back in the society. Non-caliberated ATMs sprinkled salt on the wounds.

This move is badly affecting the agriculture sector. The rural economy has been brought to its knees. Consumption is declining and so is the production level. The corporate sector is laying off their employees and so is the unorganised sector. These are maybe just short-term worries, as per our highly qualified Finance Minister Arun Jaitley. Apparently, a bright future awaits us in the long-term.

This brings me back to the question I raised at the beginning of this article. Was it the policy or implementation? What I see is that we have been burdened with the high cost of secrecy. As far as the motive goes, only time will tell but at the end of the day, people will lock their wounds and get back to work. That’s the harsh reality.