The damage that demonetisation has wrought on India’s economy, and especially its poor, is by now a topic so widely debated that it seems to have run its course, even though its repercussions are still being felt. But a recent ‘high level internal report’ by government officials seems to have reignited the debate. India Today journalist and television news anchor Rahul Kanwal, who has previously been accused of bias in his news coverage, made some tall claims in his coverage of the report. Citing ‘exclusive access’ to the report, Kanwal’s India Today article claimed that demonetisation has strongly boosted the income tax base in India, as well as the mobile wallet economy and debit card usage figures. “Senior officials in the administration say that demonetisation has sent a message that those who evade tax are engaging in a form of financial terrorism and that the law is now going to come after them,” says the report. But one of the tallest claims that Kanwal makes is that demonetisation has given India’s economy a ₹5 lakh crore advantage. He derives this from an alleged data point in the report that claims that at the end of April of this year, the total amount of currency in circulation in the economy was ₹14.2 lakh crores, as opposed to ₹17.77 crores at the beginning of demonetisation. This, Kanwal’s article claims, means that a significant amount of cash hoarded by citizens has been eliminated, thus boosting the economy.
If this strikes you as funny, you’re not alone – journalist Mayank Jain also feels that the figures don’t add up. Jain took to Twitter to explain, in detail, why he thinks Kanwal’s assessment of this internal report – summed up pithily in a tweet that trumpets the benefits received by the economy under the demonetisation scheme – is flawed and disengaged from the reality of the country.
My story on a @PMOIndia Govt report which details the benefits the economy received from DeMo. @mail_today
URL: https://t.co/nrL9RGLc7O— Rahul Kanwal (@rahulkanwal) May 25, 2017
Jain explains why the disappearance of this ₹ 5 lakh crore from the economy is not necessarily an advantage at all, but may, in fact, be a signifier of how the poor – who may have been affected the most by demonetisation – are not often even counted in such economic reports. Take a look for yourself at how Jain contests most of the major claims made by Kanwal:
Sorry, Rahul but this story is as far removed from facts as you seem to be from investigative journalism. https://t.co/OjTgJzltDv
— Mayank Jain (@Mayank1029) May 25, 2017
Here’s why. You take Rs 5 lakh crore less-cash on face value without even mentioning that nobody has disclosed how much money came back.
— Mayank Jain (@Mayank1029) May 25, 2017
Also, lesser cash in the economy isn’t directly a windfall. If anything, it just means that the poor are suffering without being counted.
— Mayank Jain (@Mayank1029) May 25, 2017
On The Purported Growth In The Income Tax Base:
Assuming less cash means it’s not being hoarded is the same fallacy as assuming black wealth existed under people’s mattresses.
— Mayank Jain (@Mayank1029) May 25, 2017
The government claims that 10% of increase in tax base is due to demonetisation. While it could just be people filing returns earlier.
— Mayank Jain (@Mayank1029) May 25, 2017
And those filing returns don’t always pay tax. 80% of filers actually evade taxes and don’t pay a single penny. Actual collection matters.
— Mayank Jain (@Mayank1029) May 25, 2017
On The Claim That 2-3 Lakh New PAN Cards Are Being Issued Everyday Post Demonetisation, As Opposed To 1 Lakh Before:
More pan cards are being issued post demonetisation according to the government but that’s not a proof of any material gain.
— Mayank Jain (@Mayank1029) May 25, 2017
That could just be people trying to access their non kyc bank accounts and get the cash out now that it’s back in the system.
— Mayank Jain (@Mayank1029) May 25, 2017
On The Boost In Digital Transactions:
The point about digital transactions also doesn’t hold true as the growth has now started to come off. UPI fell for the first time in April.
— Mayank Jain (@Mayank1029) May 25, 2017
And other digital transactions are slowly returning to pre demonetisation levels.
— Mayank Jain (@Mayank1029) May 25, 2017
And other digital transactions are slowly returning to pre demonetisation levels.
— Mayank Jain (@Mayank1029) May 25, 2017
You/Govt claims that UPI is doing 140 crore a day but the actual numbers are closer to Rs 98 crore a day. Most of these are IMPS tranx.
— Mayank Jain (@Mayank1029) May 25, 2017
Peer to peer transfers which are going through UPI now because it’s free and IMPs charges Rs 5 per transaction.
— Mayank Jain (@Mayank1029) May 25, 2017
On Banks Reducing The Marginal Cost Of Fund Based Lending Rates (MCLR) Post Demonetisation, And Generally Being More Lenient Towards Consumers:
MCLR reduction is again a castle in the air as banks are not going to pass off any interest benefits when NPAs sit on their heads.
— Mayank Jain (@Mayank1029) May 25, 2017
RBI has already tightened its policy stance from accommodative to neutral showing lack of rate cuts in the near future.
— Mayank Jain (@Mayank1029) May 25, 2017
On The Claim That Demonetisation Has Helped Increase Cashless Transactions At Toll Plazas, Petrol Pumps, Etc, And Online Transactions For The Railways:
Cashless going up at NHAI from 3% to 15% doesn’t mean anything if there’s been no increase in collections. Stupid to credit DeMo for that.
— Mayank Jain (@Mayank1029) May 25, 2017
Same goes for railway tickets, and whatever you might want to cite as an example. When there was no cash, people were BOUND to pay online.
— Mayank Jain (@Mayank1029) May 25, 2017
And, To Sum Up:
Yes, demonetisation may result in some formalisation of the economy but right now, throwing alternative facts is not helping anyone’s case.
— Mayank Jain (@Mayank1029) May 25, 2017