99.3% of banned notes returned, RBI says
Government estimates Rs5tr wouldn’t be returned because it was stashed illegally to avoid paying tax
Indian Prime Minister Narendra Modi’s efforts to weed out black money through a ban on high-value currency notes haven’t yielded the desired results.
Of the Rs15.4 trillion (Dh801 billion, $218 billion) of cash in circulation that was invalidated on November 8, 2016, the government estimated about Rs5 trillion wouldn’t be returned to banks because it was stashed illegally to avoid tax.
However, data from the central bank’s annual report yesterday showed Rs15.3 trillion, or 99.3 per cent, of the banknotes were returned, suggesting there was hardly any unaccounted wealth held in cash.
An amount of Rs107 billion hasn’t yet been received by the Reserve Bank of India after the cash ban, the report said.
“Demonetisation was a total failure,” said Mohan Guruswamy, chairman of the Centre for Policy Alternatives in New Delhi and a former adviser to the Ministry of Finance.
“We could have been on a higher growth trajectory if demonetisation had not happened. It was a colossal blunder and there will be political consequences.”
The demonetisation exercise has achieved its objective substantially, Subhash Chandra Garg, economic affairs secretary in India’s finance ministry, said in New Delhi, adding that newer notes with more security features have helped weed out fake notes.
In a series of tweets, former finance minister P. Chidambaram said economic activity was hit due to the cash ban and millions lost their jobs.
Modi’s decision to ban high-value currency notes, along with a chaotic introduction of the goods and services tax last year, acted as a drag on economic expansion with provisional data showing growth slumped to a fouryear low of 6.6 per cent in the fiscal year 2018.
Growth has since rebounded to 7.7 per cent in the quarter ended March 2018.
The latest GDP data is due tomorrow and economists forecast expansion of 7.6 per cent in the three months through June from a year earlier.