No tangible benefits

With reference to the editorial, “Big bang failure”, the Reserve Bank of India data proved conclusively that demonetisation, touted as a “shock therapy” and “surgical strike” against black money, did not achieve its objectives. It did not succeed in detecting or flushing out black money and counterfeit notes or in halting the flow of funds to “political and religious radicals”.

The data gave economists opposed to the note ban and other critics of the Narendra Modi government vindication for their stance. The fact that 99 per cent of the demonetised high-denomination notes were either deposited or exchanged for new notes in banks put paid to the Prime Minister’s desire to give each citizen ~15 lakh of the confiscated black money and allocate more funds for social welfare schemes from out of a windfall of ~3-4 lakh crore that was expected from demonetisation.

The note ban did the country a lot of harm and no good — the “surge” in tax compliance reported by the Economic Survey was “normal” and the initial “jump” in digital transactions could have been achieved by less deleterious means. Demonetisation depleted cash flow, paralysed the economy, led to loss of jobs, worsened the plight of farmers and unskilled workers, claimed the lives of more than 100 people and shaved two per cent off the gross domestic product growth rate.

The pain people bore stoically brought them no tangible benefits. Only time will tell if the note ban blunder and the subsequent likely erosion of credibility will harm Modi’s chances of winning the 2019 election.

G David Milton Maruthancode