More than 99 per cent of the demonetized 500- and 1000-rupee notes returned to the banks, according to the Reserve Bank of India, which confirms the failure of demonetization which was billed by Prime Minister Narendra Modi as the only way to bring out the black money which was growing like a cancer in the body of the Indian economy. Modi repeatedly ridiculed the critics of demonetization as corrupt voices speaking for hoarders of black money. With the RBI annual report stating that 99.3 per cent of the demonetized 500- and 1000-rupee notes were deposited in the banks, it has been proven that demonetization failed to wipe out black money. Not that anyone denies existence of black money. But it has been proven that demonetization was not the ‘brahmastra’ – the unfailing weapon – to kill the demon of black money, as Modi had made the nation believe. He has to find another weapon now, if he can. For, he has been disgracefully defeated by the elements that were supposedly holding stacks of black money in 500- and 1000-rupee notes. They managed to dodge his brahmastra and deposited their black money in other persons’ names or found other ways.
The zero achievement on unearthing of black money suggests that the main plank of demonetization failed. Modi announced demonetization on November 8, 2016 with an address to the nation: “To break the grip of corruption and black money, we have decided that the 500- and 1000-rupee currency notes presently in use will no longer be legal tender from midnight tonight. This means that these notes will not be acceptable for transactions from midnight onwards. The 500- and 1000- rupee notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper. This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency.” How hollow these words sound in the light of the RBI report saying nearly all the demonetized cash returned to the banks!
Worse, the ordinary people suffered. They had to queue up before banks to exchange their demonetised currency for new notes. As the queues were very long, working people had to take leave or lose daily wages to deposit their money. The Modi government had made no arrangements for quick replacement of old notes with new notes. The RBI did not have the capacity to print so many notes on short notice. That created a currency crunch for several months which led to shutdown of many small and cottage enterprises and loss of jobs. It led to people postponing marriages and failing to pay for the emergency care of the sick in their families. ATMs did not work, because they needed to be recalibrated for new notes. All this was presented by the Modi government as a ‘great sacrifice’ by the people for the making of a corruption-free India. The government succeeded in keeping the masses under that illusion, so much so that even those reduced to misery by demonetization thought they must go through it as the rich and the corrupt were under attack by Modi and suffering!
According to authoritative data, more than 15 lakh daily-wage workers lost their jobs due to demonetization. Small and cottage industries run on cash, and the cash crunch made their operations impossible. According to some economists, demonetization proved damaging to growth of the economy as it wiped out 1 per cent of the GDP.
It is true, as Union Finance Minister Arun Jaitley claims, that demonetization expanded the tax base. More Indians have become taxpayers now. However, this is an achievement that is a byproduct of the demonetization plan, while the main product, unearthing of black money, proved elusive. As Gurcharan Das, well-known business guru and author says all money can be tracked now as people who have deposited it back have bank accounts. But demonetization, he insists, was not the way to do it: “The cost to the people was high, and we lost about a year of economic growth by my estimates. And to solve the jobs problem of India you need to grow at about 8% for about 20 years.” Demonetization failed to curb terrorism. The terror groups proved Modi wrong: they do not depend on fake currency notes; they can get new currency notes, as indeed was the case when a terrorist in Kashmir was found with new 2000-rupee notes. Demonetization did not make India a digital economy, either. Demonetization therefore failed on all counts listed by Modi on November 6, 2016. The only silver lining was more bank accounts and more taxpayers.