Viewpoint: Why Modi's currency gamble was 'epic failure'

P Chidambaram

Was demonetisation a scheme to convert black money into white Chidambaram asked

The Aam Aadmi Party also hit out at the Modi government and claimed that extra notes worth Rs 1.1 lakh crore were deposited in banks following demonetisation.

All the four reasons which the Prime Minister had given have proved to be false, and he inflicted misery upon the people of India, wrecked the country's economy, shaved off 1.5% of India's GDP which was equivalent to 2Lakh 25 thousand crores, the Congress leader said.

"But the government suggests this was never the objective of the notes ban decision".

The Finance Ministry, led by Arun Jaitley, also claimed that the demonetisation drive had resulted in "a substantial increase in the number of Income Tax Returns filed".

The statistics come as a blow to prime minister Narendra Modi and his Bharatiya Janata Party (BJP), which had hoped demonetisation would punish Indians with undeclared stashes of cash known as "black money".

The amusing thing is that there were no estimates of how much black money was held in the form of cash.

"The RBI report says the volume of cash currency has come down by 17 per cent", Jaitley said.

Congress in-charge of communications Randeep Surjewala said, "GDP growth slows from over 8 % to 5.7% yet those living in glass houses of demonetisation disaster remain oblivious in their ivory towers".

Sharma's remarks comes two days after the Reserve Bank of India (RBI) revealed that 99 percent of the scrapped currency notes came back into the system post-demonetisation.

The hope was that black money held in the form of cash wouldn't be deposited into banks, given that people holding it wouldn't want to be identified - in the process, a vast amount of illegal money would be destroyed.

But according to the RBI report, Rs 15.28 lakh crore out of the Rs 15.44 lakh crore in the currency that was ceased to be legal tender on November 8, 2016, has come back into the Indian banking system.

The Reserve Bank of India's report estimated that almost Rs. 15.28 lakh crore of the Rs. 15.44 crore sucked out of circulation by PM Modi's announcement, had returned to the banking system.

If that is indeed the case, it means that people who had made money by evading tax on it simply succeeded in depositing that money into their bank accounts without it being detected and held accountable for tax-evasion. "The Reserve Bank figures yesterday exposed the falsehood propagated by the government", he said. Instead just Rs 1,600 crore has not re-entered the banking system.

During the meeting, the Prime Minister also asked the ministers to spread the message of the government about work done for the benefit of weaker sections of the society especially the OBCs. The general consensus was that anywhere between Rs 50,000 crore and Rs 3 lakh crore may not come back. Though Jaitley claimed that "terrorist and Naxalite financing stopped nearly entirely due to demonetisation", he or the Modi government have failed to provide any evidence substantiating this claim so far.

The former Finance Minister & biggest detractor of note-ban, P Chidambaram took to Twitter saying: "RBI "gained" Rs 16000 crore, but 'lost" Rs 21000 crore in printing new notes!

"The upsurge in expenditure during the year was on account of change in the production plan of printing presses due to the introduction of new design notes", the central bank said in its annual report.

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