The Supreme Court has asked the central government whether it could open a window to accept demonetised currency notes from people who had genuine reasons for not getting them exchanged within stipulated time. It goes to show that there are people who still hold substantial number of devalued currency notes and that, given a chance, many more may turn up with the fond hope of getting them exchanged.
It would further undermine the government’s claim that demonetisation has helped unearth black money, in however small a measure that may be. In all probability, such a window will only help further diminish the sum the government claims to have gained as a result of devalued notes not being returned. What, of course, is interesting is that the apex Court has even put up such a query.
Reports had suggested that, contrary to the government’s expectations from the currency ban, it landed up with most of the high-value currency being returned that had supposedly been in circulation. With more people queueing up to deposit out-of-circulation currency, it would mean that there was much more currency in circulation in the market than what the government had knowledge of. In any case, what view the government would take of the situation for the acceptance of devalued notes is yet to be clarified.
It may be noted that the notes that may be returned availing such a window, if re-opened, need not all be black money. Many of the holders of such notes could have held on to them owing to fear, ignorance or some other inability. There are many households in which hard-earned money kept aside had been forgotten about only to be found after the demonetization deadline. Such cases deserve to be attended to.
However, on the flip side, the government will also need to take a cautious approach to giving another window of opportunity to exchange currency. It would be a tough task for the banks to return to demonetization mode and the exercise would not only eat up more time and resources but again open up the possibilities of manipulation that gave bankers a terrible name in those harrowing days. At a time when banks are already grappling with non-performing assets resolution, utilizing them to handle the proposed window could put undue pressure but also open up new avenues of glee for them.
Possibilities of pleasure aside, the pains could also be equally great. As several months have passed since demonetization, it may not be possible for all depositors to provide evidence supporting their claims over inability to deposit old notes. It will make the process of verification cumbersome.
Under the circumstances, innovative measures will have to be adopted to ensure that the fresh deposits of invalid currency are verified. It would also be unwise if the government gets agencies other than banks involved in the exercise.
Also, unless centres facilitating exchange are opened across the country, it would be difficult for people to exchange notes in their possession. There is also a need to ensure that black money hoarders do not use the opportunity to get more of their illegal holdings exchanged by means of the fresh avenue.
While demonetization certainly did not have the desired impact on black economy, the harassment it caused to the common citizen is still fresh in our minds. Terror funding has not stopped. Neither has counterfeit currency been chased out of circuit. All in all, as demonetization has been widely hailed as the biggest flop gamble of the present Narendra Damodardas Modi government, it is to be seen how the economy wades ashore from that futile showmanship act.
