On 8 November 2016, the Prime Minister, Mr Narendra Modi announced the demonetization of Rs 500 and Rs 1000 notes.
The long-term effects of the move on our economy are yet to materialise, but it’s definitely taken a toll in the short term.
As on November 8 2016, the total value of these notes amounts to Rs 15.4 lakh crore. According to the Reserve Bank of India (RBI) data, Rs 12.4 lakh crore worth of defunct notes were already deposited by December 10th.
Initially, when the move was announced, it was meant to tackle black money and fake currency notes. But at this rate of deposits, the entire cancelled currency will be back with the banks before the 30th December deadline. With no black money in sight, this would prove the demonetisation move futile and expensive.
The government, probably unable to accept this situation, has asked the RBI to re-examine the figures for the demonetised amount that has come back into the system.
The economic affairs secretary Shaktikanta Das said:
The figures announced by the RBI… there are a lot of areas where we feel there could be double counting. We have identified those and requested the RBI and banks to double-check.
Clearly, the government still supports the move and its initial goals of curbing black money.
However, Vivek Kaul, the editor of Vivek Kaul’s Diary believes otherwise.
Here’s what he writes:
In the press conference that followed the monetary policy, the deputy governor of RBI, R Gandhi, said that close to Rs 11.55 lakh crore of demonetised notes had made it back to the banks.
This means that around 75 per cent of the demonetised notes are already back with the banks. (Rs 11.55 lakh crore divided by Rs 15.44 lakh crore of demonetised notes). With 24 days still to go until December 30, the last day of depositing demonetised notes, chances are almost all the demonetised money will come back to the banks.
This is something that the Revenue Secretary Hasmukh Adhia told The Indian Express: “The government expects the entire money in circulation in the form of currency notes of Rs 500 and Rs 1,000 which have been scrapped to come back to the banking system.”
Given this, the question of black money being destroyed does not exist. What this means is that the black money in the system has been exchanged for new notes in various ways.
