here is little to choose between the incumbent government and its predecessor. If UPA-II is accused of hiding its activities behind a veil of silence, NDA-II is taking cover behind empty rhetoric to hide its true intentions. The Reserve Bank of India in its recent report came out with the final figures of demonetised currency; it said 99.30 per cent of devalued notes — `15.31 lakh crore out of `15.41 lakh crore — had returned to banks. The gap would close further if the notes stuck in Nepal, Bhutan and other foreign countries are taken into account. The rest could be accounted for as notes that have gone out of circulation owing to damage or are left with households as they were unable to get the currency exchanged before deadline. This means that nearly all the notes that were in circulation have returned to the banking system and the figure is nowhere near what the government had expected to gain from the painful exercise.
Official big data on demonetisation released by RBI in its annual report for 2016-17 showed that the cost of printing notes doubled to `7,965 crore in financial year 2016-’17 from `3,421 crore in financial year 2015-’16.
There were other costs such as the nearly `30 crore bill that the IAF raised towards meeting costs incurred in transporting new currency across India in their special transport planes to meet demand and the expense of several crores of rupees for recalibrating ATMs to enable them to dispense the new currency. The Centre for Monitoring Indian Economy had estimated that the cost of withdrawing high-denomination currency notes would come to about `1.28 lakh crore during the 50-day window till December 30, 2016, that the government had set. According to Economic Survey 2016-17, the estimated loss in economic output as a result of demonetisation was to be anything between a quarter of a percentage point to one percentage point of lost growth. The report said GDP growth rate slowed from 8 per cent in 2015-’16 to 7.1 per cent in 2016-17 to 6.7 per cent in 2017-’18. Above all, more than 100 people lost their lives while having to queue up before banks and ATMs to get notes exchanged.
If anything beneficial has come out of demonetisation till date, it is only political, that too, for the Bharatiya Janata Party. The party was able to win the Assembly election in Uttar Pradesh, playing David fighting Goliath of corruption and seemingly taking on the big and mighty. It was able to tap into the natural resentment that the common man held for the well-off. TK Arun writes in ‘The Economic Times’: “[Demonetisation] was a huge success in political terms for the prime minister personally and for his party in the Uttar Pradesh Assembly elections. And that must be understood as having been the real goal of the demonetisation exercise, all along.”
Some recent reports also indicated that demonetization was but one other window given to black money holders to turn their money white without punitive action. But facts behind such claims will take time to emerge as has been seen with demonetisation itself. After the November 8, 2016, move, the Reserve Bank (RBI) took its sweet time (close to two years) to come out with supposedly exact figures of demonetised currency that made it to the banking system. In this whole exercise, the other major beneficiaries apparently were bank officials who are suspected to have helped get money exchanged for a cut for moneybags who now have an even more convenient way to hoard money in the form of the `2000 note.
While the intended targets of demonetisation have slipped through the multiple loopholes, the government itself is caught in a real bind with external factors, too, turning against it. Fuel prices are rising and little has been achieved in real terms for achieving energy self sufficiency. With the rupee plunging each day to new lows India’s oil bills are bound to rise. Inflation is still not within a convenient range; the effect of an erratic monsoon on agriculture remains to be seen. With the dollar getting crazily strong, investments in alternative sources of energy do not look attractive for some time in the future. The oft repeated claim that demonetisation killed micro, small and medium enterprises, thus killing employment opportunities for hundreds of thousands, does seem plausible now.
The fig leaf of digitalisation that the government had donned following the failure of its first premise for demonetization — that of flushing black money out — wilted in no time. Cash has returned to be the preferred medium of exchange given the fact that it affords greater individual freedom and lesser dependence on fallible technology. The SBI has in a recent report warned that the quantum of counterfeit currency is set to rise again. All such things makes the citizen feel that the government is yet to substantiate any of its tall claims about the benefits of the overnight unnatural fatal blow dealt to the nation.