All White, No Black, Then Why DeMo

It was sometime in May 2018, when the Reserve Bank governor was briefing the Parliamentary Standing Committee of the Ministry of Finance, on India’s gigantic banking crisis, that he was asked about the total cash deposited with banks during the demonetisation period. The RBI governor initially evaded the question, but finally said that the RBI is still counting and is yet to finalise the figures. This answer was certainly disappointing, but not surprising at all. The Modi government which never misses an opportunity to show off favourable performance statistics, would have itself declared this figure of total cash deposits, long ago, had it been a favourable one. If it was that a substantial amount of cash was not deposited during demonetisation, then the government would not be struggling to prove it a success, as it has been, with each passing month and on every available forum.

In this age of high speed currency note counting machines, the government has taken almost two years to count the cash that was then deposited. The RBI has finally announced in its Annual Report for 2017-18, that 99.30% of the total cash of Rs.15.44 lac crore that was in circulation at the time of demonetisation, was deposited with banks. A mere Rs.10720 crores, which is even less than the cost of printing and distributing new currency notes, did not come back. This figure was always sensed, but has only now been officially admitted. With almost all cash in circulation coming back, it proves that the government’s primary and main object of demonetisation ie. to combat/neutralise black money in unaccounted cash, has been an utter failure. In its initial days of demonetisation, the government had claimed that about Rs.5 lac crores of cash will not come back and to that extent black money will be automatically cancelled. It was called the demonetisation dividend, but that just did not happen. The government babus now speciously mention the fringe side benefits of demonetisation ie. to stop terror funding, banish counterfeit currency and establish a non cash culture (all of which was very temporary) as proof of success of demonetisation. That’s a complete U turn and that too not an honourable one.

The obvious conclusion with this RBI disclosure is that demonetisation was a mega flop. It leads to an ironic and erroneous inference that all cash in circulation was official and that there was no element of black money in it. It means that cash in India is squeaky clean; then why all the heavy handed measures to discourage and ban cash transactions in India. And that itself is contrary to the government’s own claim of huge black money in cash, when it estimated that about Rs.5 lac crores of cash will not come back in the banking system. Cash being squeaky clean is also contrary to certain hard hitting realities viz. all the crimes of corruption, tax evasion, note bank politics, hawala and money laundering transactions are all conducted in cash and result in the pile up of mountain loads of unaccounted cash.

That raises the billion dollar question and that is, then how is it that all the cash came back and was deposited in banks. The fact is that the system mainly connived to defeat the ill planned demonetisation move and that includes banks which laundered the cash, cooperative societies/banks, politicians/babus who helped the select few and all those petty workers, farmers, labourers etc. who lent their names and deposited cash on behalf of the illegal cash hoarders. It ensured that all was white and none was black and defeated a hasty, ill planned and poorly executed demonetisation, which caused untold damage to the livelihood of millions in the informal sector and the lowest strata of society, consisting of poor farmers and daily wage labourers. The fact that 99.3% of the cash came back does not prove that all cash is white and none of it is black, but does firmly conclude that the hasty demonetisation move was undertaken for oblique political reasons and not to combat tax evasion.


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