Nirav Modi once again is at the centre of public discourses. One of the articles the I read recently, mentioned how he helped few Bollywood celebrities and politicians to buy jewellery after Centre banned Rs 500 and Rs 1,000 currency notes on November 8, 2016. At the time of demonetisation, media was flooded with reports of how cash is being thrown in banks, burnt in homes, and thrown on roads. However, with 98.96% of demonetised money back in the banking system, all these stories seem baseless now. Moreover, the demonetised currency notes from Nepal and Bhutan haven’t made their way back into the system.
Recently, around 100 crores of demonetised notes were seized from Kanpur. Additionally, many people are still fighting in courts to deposit their hard earned money in banks. Also, the possibility of a few demonetised currency notes still somewhere hidden in old bags or jeans. Does that mean that in reality the banking system received more than 100% of the demonetised currency and maybe that’s why the government is not revealing the exact facts about demonetisation?
Furthermore, the periodic changes in rules have seriously damaged RBI’s reputation. So how did demonetisation failed? Yes, it did! It’s high time we accept it. But let’s discuss how??
Taking up the case of Nirav Modi, we can deduce that businesspeople had several channels to park the black money they had in cash. They kept transacting in demonetised money even after the government banned all the old Rs 500 and Rs 1,000 currency notes. Just like Nirav Modi, they also took money from their high profile friends. They billed it in back dates, adjusted their money, and made profits. Apart from that, they even made pretty good use of Jan Dhan accounts. Most of the Jan Dhan account holders are daily wage earners who work for these businessmen and have hand-to-mouth earning that’s not always sufficient to fetch them proper meals throughout the year. Lakhs of such workers were given their old dues, enough for most of the people to adjust their black money. They were even paid in advance for the next few months. Jan Dhan accounts helped in money laundering, and we kept blaming our bank colleagues who toiled day and night to meet our daily needs. They suffered the most.
This was one side of the story, the business class, who had every resource to adjust their few percents of black income. Now let’s talk about black money the politicians and bureaucrats had. They receive their salary via the system. Depositing money in bank accounts was not a plausible option for them. They could have adjusted a few percents of the money they had with their business friends but adjusting entire money via that chain would have been impossible. But, the government policies came to their rescue. All the government counters were accepting demonetised notes; Toll plazas, Petrol pumps, Milk booths, Rail tickets, LPG cylinders, power and water bill counters, consumer cooperative stores, public counters, government hospitals, seed counters, etc. Most of them operate under the supervision of these politicians and bureaucrats. All of these counters, flouted government instructions and accepted banned currency notes, but only when your bill amounts to the exact figure of Rs 500 or Rs 1000. Rest, you had to pay in other valid dominations. They were receiving more legal currency, which easily helped their supervisors in adjusting cash. On the other hand, bank officials got access to a lot of Aadhaar card numbers and used them to convert black money of these esteemed people without going through all the formalities.
There is a great possibility that money that is back in the system, consists of a lot of fake currency since it never underwent any regulatory. The only people who suffered were lakhs and crores of people who stood in lines, and those who didn’t have money to buy even their daily essentials. Indian economy was the worst victim of demonetisation. It’s still suffering from its aftermath. Our economy thrives on cash. According to the Labor Bureau’s Fifth Annual Employment Unemployment Survey 2015–16, 72.8% of India earns below Rs 7500/month. We need a systematic reform of the economy, not such ill-conceived moves.