Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized, was recovered.
After months of speculation, the cat is finally out of the bag. It is now confirmed that demonetisation achieved nothing and in fact cost India a lot. On Wednesday, The Reserve Bank of India (RBI) in its annual report announced that as many as 99.3 per cent of the old Rs. 500 and Rs. 1,000 notes that were banned overnight in November 2016, were returned.
Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized was recovered, proving that the move was a massive failure.
The “humungous task of processing and verification of specified bank notes (SBNs) was successfully achieved,” the RBI report said.
“The SBNs received were verified, counted and processed in the sophisticated high-speed currency verification and processing system (CVPS) for accuracy and genuineness and then shredded, it added. SBNs refer to the demonetised old 500 and 1,000 rupee. “The total SBNs returned from circulation is Rs 15,310.73 billion,” the RBI said in its report.
The cost of demonetisation
Last year, the RBI said that its cost of printing currency notes in 2016-17 had doubled to Rs. 7,965 crore from Rs. 3,421 crore in the previous year due to demonetisation.
“This means that just Rs 10,720 crore of Rs 500 and Rs 1,000 notes failed to come back to the RBI, as against expectations that over Rs 3 lakh crore of black money would not return to the banking system. The sudden withdrawal of notes in 2016 had created a liquidity shortage, with long queues outside banks and people undergoing immense hardship across the country. It had also roiled the economy, with demand falling, businesses facing a crisis, and GDP growth declining close to 1.5 per cent. Many small units were hit hard, with many reporting huge losses even after nine months,” reported Indian Express.
The Guardian reported that 1.5 million jobs were lost due to the move. “The figures suggest prime minister Narendra Modi’s demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5m jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy — a key rationale for the move,” it said.
“Industry sources said that even by conservative estimates, at least 12 lakh workers lost their jobs due to the “twin blows” of demonetisation and GST in key sectors like textiles, auto spares, ceramics and engineering goods. In all, if one adds up available government data and industry estimates, the unemployment figure is a staggering 32 lakh,” said a report.
Former Finance minister and member of parliament, Rajya Sabha, P. Chidambaram tweeted that, “Indian economy lost 1.5 per cent of GDP in terms of growth. That alone was a loss of Rs. 2.25 lakh crore a year. Over 100 lives were lost. 15 crore daily wage earners lost their livelihood for several weeks. Thousands of SME units were shut down. Lakhs of jobs were destroyed.”
Small business had to down shutters and about 90 people died between Nov 8 and Dec 8 2016, due to consequences arising out of demonetisation.
“While there were no benefits from demonetisation in economic terms, the costs were certain, and they were substantial. The printing costs of the new notes to replace the old ones is estimated to have cost in the range of Rs 12,000 to 16,000 crores. Add to it the costs of logistics; the cost of refurbishing and recalibrating two lakh ATMs spread all over the country; and, of course, the cost of economic activity being stopped by unavailability of cash, and the human cost actually incurred in terms of hunger and death,” a report in Sabrang India said.
“As this began getting exposed, Modi resorted to shifting his goalposts. He twisted the entire rationale to that of promoting digitisation, or cashless (later moderated as less-cash) economy. Surprisingly, digital payment companies like Paytm were ready to cash in on this cashless rhetoric. In the absence of cash, some people in urban areas quickly switched to digital payments,” the report added.
“On November 24, 2016, Manmohan Singh rightly described Modi’s demonetisation as “legalised plunder and organised loot”, and predicted that the growth rate might come down to 6% from a whopping 7.3 % in the third quarter ending September 2016. Many economists thereafter have predicted similar damage to the economy. The Centre for Monitoring Indian Economy (CMIE) has predicted that India’s GDP growth rate for the current financial year is set to slow to 6%, “on account of demonetisation”, and warned that there’s no hope of recovering from this slower pace for the next five years,” it said.
“Over the last two years, at least three of the government’s major claims have collapsed. It was supposed to flush out black money and end corruption. The government predicted that Rs 3 lakh crore in currency would not return to the banks. This has proved to be false, as most of the cash has returned. Either the black money was parked in other assets or is yet to be identified as such from the amounts deposited in various banks across India. Meanwhile, the country’s banks reportedly detected a 480% jump in suspicious transactions post demonetisation,” reported Scroll.
“Second, demonetisation was to help detect fake currency, which apparently funded terror and distorted the economy. The government claimed that at any point of time, there was Rs 400 crore in fake currency notes floating in the economy. Nine months after demonetisation, it was claimed that Rs 11.23 crore in fake currency had been detected. Now, the Reserve Bank reports a huge jump in fake Rs 2,000 notes, which were introduced after demonetisation,” it said,
“Third, demonetisation was to pave the way to a cashless economy and the gleaming new world of digital India. Two years later, the amount of cash with the public has reached a record high, the bank has claimed,” it added.
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