Nine months after the Central Government withdrew the legal tender status of 86% of Indian currency, the Reserve Bank of India (RBI) has delivered a report. It was speculated that notebandi has produced zilch. The report confirms that fear. It says 99% of the currency that were disbanded has come back to the RBI. This information prompts several questions, which we list below.

(1) What happened to black money? In his 8th November announcement of notebandi Modiji stressed that black money would become immobile after notebandi. Hoarders, criminals and other unsavory characters will be shocked to discover that the cash hidden under their mattress are worthless pieces of paper. Grumbling and cursing they would consign the cash to the Ganga Maiya. For, if they go to it deposit it in the bank the government agencies would nab them for the unaccounted wealth. In a similar manner terrorist funding would be destroyed. The attorney general Mr. Mukul Rohatgi had claimed in the Supreme Court that about 4 to 5 lakh crore rupees are not going to return to the system. In other words, about 30% of the demobilized notes would not return. This is the volume of black money that would be destroyed in the surgical strike. The fact that 99% has returned means that the claims of the government have been belied.

(2) What could be the reasons behind the near full return of the banned notes?

  • Possibility number one. Could it be that there was no black money to begin with? Which is why almost all the notes that were in circulation have come back? If that is the case then why was a fuss created over kala dhan? Let us remind ourselves that in the 2014 Lok Sabha campaign of “Ab ki bar Modi sarkar” corruption was projected as a major election issue.
  • Possibility number two. There was black money, but perhaps it was not in the form of currencies? Perhaps it was in the form of assets such as land, real estate, gold etc. which yield more return than currency notes? In that case, what was the whole point of banning currency notes?
  • Possibility number three. Even if a part of the unaccounted wealth was in the form of currency notes, that part has been turned white? Several jugaads have been reported in the media, innovative ways to surreptitiously whiten black money: renting bank account of others, hiring people to change the money, buying train tickets to cancel them later on, buying new currency notes in the black market and so on. In that case, the ease and the extent to which the whitening went on expose the failure of the exercise.

(3) About 1% of the demobilized notes has not returned. Could this portion be called black money? Is this 1% the magnitude of success of notebandi? But as every sufferer knows, there are many families which did not return their old notes, not because those were ill-gotten but there were circumstances which did not allow them to return the notes. Some did not know of the existence of old notes hidden in a corner of the drawer, some simply forgot, some did not know about notebandi, some lived in far off places with no banks or post offices around. To address such cases the government assured that one can return the notes by March 31 provided valid reasons could be cited. Later, it went back on its words and said no return after December 31. Clutching old notes, desperate people queued up in front of the RBI offices after December 31, only to be chased away by the police. If given a chance, probably the remaining 1% would be returned.

(4) So, 99% returned back to the banking system without any trouble. A part of this changed colour in the process. The remaining 1% can hardly be called black money. So, what did we gain by notebandi if no black money was caught? The government was changing its tune right from the time when it became clear that most disbanded currency may come back. Jaitleyji is now claiming that the fact that old notes have come back is an indication that the informal sector of the country is now in the government radar. This would help in the collection of taxes. Confiscation of money was not a goal at all (which is a strange claim, considering point no. 1). This raises two questions.

  •  What would happen to those who deposited their ill-gotten money in the bank? Will they go scot free because tax compliance will improve? The government has announced elsewhere that some people have been identified against whom actions would be taken. This is in the future tense.
  • Black money has come back, but have the sources of the money been identified? Have the businesses, practices which gave birth to the black money been brought to book? If not, these would create more black money in future.

By bringing up informal economy and tax compliance the government seeks to distract public attention from the stated goal of destroying black money, for, no success can be shown on that count.

(5) Jaitleyji has further claimed the volume of cashless transactions has gone up due to notebandi. Some doubts remain over this claim:

  • It is not clear if it has gone up due to demonetization. In November and December the volume of cashless transactions spiked. But subsequently it gradually fell. The reason for the dip is understandable. People were forced to move to digital payments, they did not do so voluntarily. When condition returned to normal they returned to their preferred mode of payment, for digital payment often has transaction charges.
  • The government has increased the charges on cash withdrawal from the ATM in the interim period. This has given a push to the digital payment business.
  • The volume of currency notes has gone down compared to the pre-notebandi period. This decline is a conscious decision on the part of the government. Less currency is being released so that people get forced to use less cash.

In short, the initial rise in digital payments has subsided. The volume of digital payments has increased, but it is doubtful how much notebandi was responsible for it. Since the volume of digital payment has gone up nevertheless, profit made in digital payment business has increased. Was this profit earned by the corporates worth the hardship the people were made to go through?

(6) Political profits have been made. The BJP’s victory in the Uttar Pradesh elections is a proof of this. The aam janta have been convinced that Modiji is a bold, no-nonsense leader. Modiji does not grow a lily liver when he has to make tough decisions. He has forced the unscrupulous elite stand in the same bank queue where the odorous aam janta stood. Both of them went through the ordeal to serve the Bharatmata, in whose protection Siachen soldiers stand in guard. A narrative of patriotism, self-sacrifice, hero-worship was weaved and sold with a remarkable measure of success.

More than 100 people died in bank queues trying to get to their own hard-earned money. Eight thousand crore rupees were spent to print notes. Billions of hours were wasted waiting patiently in bank queues. Bank staff forgot all their other works as well as night sleep. The working poor lost livelihood, for the notes to pay them with were nowhere to be found. All this, it appears, is a trifle in the worship of the fuehrer, er, the Bharatmata.

(This is a translation of a Bengali article which is due to appear on the Guruchandali website.)