More than 8 months have passed since the Prime Minister announced demonetisation of old 500 and 1000 rupee notes causing Indians to queue up outside banks to return their currency. More than 100 people died waiting in the queues, small businesses went bankrupt, labourers lost their livelihoods and India’s economic growth took a nosedive.
Yet, after all the pain the country had to endure, the Modi government has no answers to the questions: How much of the money has returned to the banks? How much of the black money has been revealed? And where is the 3 lakh Crore of uncovered black money that the government promised it will spend on the country?
It is more than 6 months since the last day when demonetised currency was officially accepted for depositing and the RBI is still counting the old notes that have been deposited by people. The RBI Governor Urjit Patel, , claimed before the Parliamentary Standing Committee on Finance a couple of days before that he does not know, by when the counting would be completed.
Those unfamiliar with RBI’s reputation may be forgiven to think that it is an inept institution, run by people who can’t finish the simple task of counting currency. Yet, those of us who are familiar with RBI’s strong reputation globally know that it is one of the best central banking institutions in the world. Central banks all over the world were letting banks under their regulation to dabble in risky hybrid financial instruments and derivatives, which resulted in the global financial crisis of 2008. RBI, under the then governorship of Y V Reddy had the foresight to regulate those instruments, thereby shielding India largely from the 2008 crisis. At that time, RBI’s role was widely appreciated in India as well as across the globe.
Many a time since then and before that, RBI proved its mettle in managing India’s complex monetary system and also the large banking sector.
Then, what is the reason for this apparent problem in counting? Why did, Urjit Patel keep insisting that the notes are still being counted every time he appeared before the standing committee?
There can 3 possible reasons for RBI’s “excuse” for not being able to count the currency.
First possible reason - Almost all the demonetised currency has returned to Reserve Bank’s treasury .After Modi’s bombastic claims that demonetisation is going to uncover Lakhs of Crores of black money hoarded by corrupt officials, businessmen and income tax evaders – the RBI is probably hesitant to come out and say that the Prime Minister was wrong and the demonetisation drive uncovered very little black money.
On December 10th, when 20 days still remained for the deadline to return the old notes, RBI announced that 12.5 Lakh Crores of the Rs. 15 Lakh Crore demonetised currency was exchanged. By then, it was clear that all the old money was on its way back to RBI and the black money unearthed if any, would be peanuts. From then on, RBI stopped declaring the amount of money returned by the public and seemingly developed a chronic inability to count.
The second possible reason – the money returned has exceeded Rs. 15 lakh Crores, which was the total amount of demonetised currency. How is that possible?
People in the banking circles suggest that a lot of fake currency that was in circulation has been exchanged at the banks and converted into legal tender during the chaos that was demonetisation. The harried bank employees serving mile long queues had little time to check whether the currency was fake or not.
BJP government, which brandished demonetisation as the weapon to fight terror financing through fake currency printed in Pakistan, can hardly come out and say that they have handed out legal tender in exchange of the fake currency - particularly in the backdrop of increasing terror attacks on security forces and civilians, the recent most being the one on the Amarnath Yatris.
The last but the least possible reason is that RBI does have counting trouble.
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