Close to ten months after that completely unthought-of decision to withdraw 500 and 1000 denomination, today, August 30, 2017, Reserve Bank of India has released it Statutory Annual Report and we can infer in no uncertain terms that it is a failure.
What was the original motive of Demonetisation? Its important to recollect because, along the way, people conjured up reasons as they saw fit. As I write this, PIB has said collecting large amount of Money in short term is a success. But the Prime Minister in his November 8th speech outlined these four reasons.
So, in this fight against corruption, black money, fake notes and terrorism, in this movement for purifying our country, will our people not put up with difficulties for some days?
I will not talk on corruption because, we all know for a fact that it has not gone down, demonetisation or not. An US Risk Management consulting firm has as recently as this week has acknowledged thus. So corruption stands debunked.
It was repeated time and again that there will be windfall gain from Demonetisation. In fact, many pro-Demonetisation economists went on record questioning the credibility of critics whereas all they had was this Bollywood notion of money under the bed theory and nothing but back of the envelop calculation, with assumptions which wont stand academic scrutiny.
A case in point: Bhagwati and Co.
They conservatively expected 5 Lakh crore of black money, consisting of money which will be returned and money which will not be returned. And the proportionate Tax Collection at 30% would be 1.5 lakh crore.
Not just that, there were many who came forward to support the theory. A sample list is here.
Fact from RBI report: There were 15.44 lakh crore of Currency in Circulation. Out of which, 15.28 Lakh has been returned. Refer to section XI.6.2 (page 213). So in effect, 99% of currency returned, whereas government expected a windfall (though not publicly).
Read that again. And just to top it up, RBI still has not entirely collected Indian Rupee from Nepal.
From the ramparts of the Red Fort, PM said that Government has confiscated the 1.25 Lakh crore. What was he quoting, only God knows!
But if money had come, it must have been accounted for and it must have been taxed. He claimed certain tax numbers. Again this was found to be a poetic licence. In other words, a lie. This has been countered and the Finance Ministry was forced to issue a clarification and that was again debunked by James Wilson in his article. In fact, in economic survey, it was approximated that 5.6 lakh new people would have paid tax because of demonetisation.
In short, two points:
- 99% of demonetised currency has come
- Whatever money has come, taxes proportional to the so-called black money or suspicious deposits envisaged is not collected.
So this myth of people hiding undisclosed income in sacks, bags, mattresses, compound walls are just that – a creative urban legend. And real world has proved otherwise.
Black money argument kicked down the drain.
No one could guess how much counterfeit notes were in circulation. There were many theories and as usual government was vague on its answer. But a story in Economic Times quoted a government secret report claimed that it was 400 crores. They quoted ISI and we forgot to ask questions because, we must believe whenever ISI is quoted.
Now look at the figure of counterfeit demonetised currencies from RBI.
Yes, you read it right. It is mere 42 crores. And last year, without this sacrifice of demonetisation, we had detected 27 crores. So for this extra around 15 crores, we had to demonetise! To put this in perspective, this 15crore additional is 0.00097% of the total currency in circulation. How efficient and how intelligent of the prime minister!
Counterfeit note argument in itself is counterfeit.
In one line – there is no benefit because of demonetisation.
If someone says less cash in an economy is good, please send a detailed analysis, economic & otherwise and not back of an envelop analysis on why and how that is good. US grew before electronic payments took hold.
But look at the costs:
- Many people have died. Though government hasn’t acknowledged, deaths have been well documented.
- In the annual report, in many places impact of demonetisation has been recorded as negative. In fact, words 8-11 of the document is “transient impact of demonetisation.”
- Consumption, GVA and other economic indicators fell because of demonetisation.
So there are no actual, tangible, demonstrable benefits. But the costs are real.
All in all, when you look at the entire exercise, it was only for dramatization. It was only to show that the rich had bundles of money in their homes and they are depriving the poor of this country from what is legitimately is theirs. It was a con job where most were befooled. People genuinely believed, against all sane voices and economics, that ‘acche din’ were near. But the slogan-in-chief has moved on to the next slogan of New India.
The content of the entire November 8th speech was as if this silver bullet of demonetisation will cure all. On November 13th 2016, he cried, saying “This is major step to eradicate corruption and black money. If you find anything wrong with my intentions or my actions, hang me in public. I promise you I will give you the India which you desired. If someone faces problem, I also feel the pain. I understand their problem but this is only for 50 days and after 50 days we succeed in this cleansing.”
A person, who has a delusion about one’s own power, in this case, to change the entire nation in a 50-day period, is a megalomaniac.
A person, who cannot back numbers he quoted on all important speech on independence day from Red Fort, is a liar.
A person, who doesn’t go by solid reasoning and takes decisions in whim, whether to hug Nawaz Shariff unannounced or to demonetise, is a Thuglaq.
I see no calls for PM’s resignation. In any other country with self-respect, there will be. Planning, bulldozing and arrogantly still defending a ‘monumental failure’ calls for his resignation. I know it wont happen. That cannot stop me from demanding it.
PM, if you have any shame, resign and let us live in peace and stability!