5 Years of Demonetisation: Where do we stand now?

Kakali Das

On 8th November, 2016, at 8 pm, demonetisation was announced to achieve 3 objectives – the fight against corruption, black money and fake currency. But the aims/objectives of demonetisation kept on changing faster than the speed of light. When on the one hand, the government was said that demonetisation would effectively neutralised terrorism, naxalism, on the other hand, it said that it would help build a cashless economy. A Minister, Ravi Shankar Prasad even remarked that demonetisation would stop prostitution in the country. And, how could our media stay mum? The mainstream media also joined in showcasing their gold standard of journalism – by a lecture on the presence of ‘nanotechnology’ or ‘GPS chips’ on the 2000 rupee notes. All hail our Journalists!

While many people might have fallen prey to misinformation, but some saw the big picture. What happened to those objectives? In 2016, 86% of currency was frozen overnight. Of 15.44 lakh crore, Rs. 15.28 lakh crore or 99% returned to the system, said RBI. According to theCentral Statistics Office (CSO),in 2016-2017, GDP was Rs. 151.84 lakh crore, and this process of demonetisation cleanedRs. 16,000 crores (0.1% of GDP) of black money out of the system. As of a result, the process shaved 1% of GDP. So, in laymen terms, in search of Rs. 10, we lost a 100. Still, it would have been acceptable had this move of demonetisation erased corruption or money laundering off the system. The reality is that money laundering networks thrived amid demonetisation. Even today, officers procure hefty black money during raids, as can be seen. Yet, the system claims that black money was curbed by demonetisation.

During demonetisation, the government said, “Demonetisation was ‘bitter pill’ to treat corruption.” This, the government claimed even four years later. But it was found in a survey by Transparency International that India has highest rate of bribery in Asia. In 2020, India fell to 86th rank in Corruption Perception Index. In 2016, when demonetisation was decided, we were 79th.

Thirdly, they said that demonetisation was meant to target fake notes to benefit economy. But, according to NCRB, fake bank notes seized in India doubled after demonetisation where Gujarat topped the list, and 56% of all seized fake money was 2000 rupee notes. Was this note too easy to make a copy of? Slowly, and quietly, without any press coverage, the 2000-rupee pink notes were pulled back from circulation.

The next theory was that the process of demonetisation helped to stop terror funding, as claimed by former finance minister, Arun Jaitley, and present finance minister, Nirmala Sitharaman. Did demonetisation stop terror acts? According to the South Asia Terrorism portal, Maoist activities have somewhat stopped, which is indeed a good news. From 263 incidents reported in 2016 to 138 in 2020, and 102 in 2021, there has been a visible decline in the numbers of these incidents. However, in Jammu & Kashmir, such activities crossed doubled century in 2018. So, even after the ‘masterstrokes’ of demonetisation and the abrogation of article 370, terror activities have increased in the two years after demonetisation, and stable around 130-140 mark. In fact, in Global Terrorism Index 2020, India is 8th in the world. (But we are still happy that at least we are better than Pakistan) Speechless!

Lastly, we can all agree to the fact that India moved cashless economy and digital payments grew as per RBI. In fact, India has pipped China and USA. SBI report shows that share of informal economy has dropped from 52% to 15-20% post digitalisation, demonetisation, GST. It was mainly due to three reasons – digitalisation, GST, and employee registration in EPFO. However, the role played by demonetisation in it is debatable. Now, while on the one hand, payments increased, cash has also reached all time high despite demonetisation. It happened during the pandemic as a safety measure according to experts. But it’s a very confusing phenomenon.

Demonetisation made a direct impact on India’s GDP. As per the World Bank data, in 2016, India was 8.25% in GDP growth rate and it has declined to 4% in 2019. These data were of the time before the pandemic. After the pandemic, the economic situation has gotten worse.

In a nutshell, demonetisation was an unplanned masterstroke, and five years later, the system is unwilling to accept its disadvantages. Recently, the prime minister completed 20 years in politics, so a poster was released citing his achievements, where not a glimpse of the government’s so called masterstroke, ‘Demonetisation’ was in it. Perhaps, internally, they too admit that it was a comic tragedy. It is ‘comic’ because it mocked people’s patience, intelligence, economy, and ‘tragedy’ because many lives and businesses suffered.

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