Questionable results for Modi’s war on ‘black money’ after 99% of scrapped notes make it back into the system


Modi shocked India when Rs 500 (£6) and Rs 1,000 (£12) notes were withdrawn
Panic set in across India with many people rushing to exchange their life-savings
People were forced to declare, exchange or throw away their money
Black money refers to funds earned on the black market, on which income and other taxes have not been paid.
It was thought that black money would get burnt or caught in the taxman’s net
RBI spent Rs 7,965 crore on printing new notes and people suffered in queues

Close to 99 per cent of the scrapped old Rs 500 and Rs 1,000 rupee currency notes have come back into the banking system, according the RBI’s annual report released on Wednesday.

The Reserve Bank’s annual report for 2016- 17 discloses that Rs 15.28 lakh crore of the junked currency has made its way back into bank accounts across the country, leaving out only Rs 16,050 crore in black cash that has been weeded out.

As on November 8, 2016 there were 1,716.5 crore pieces of Rs 500 and 685.8 crore pieces of Rs 1,000 in circulation, adding up to a total of Rs 15.44 lakh crore.

RBI said just 8.9 crore pieces of Rs 1,000 notes or 1.3 per cent of the scrapped ones have not returned.However, the RBI did not give a specific number for the old 500 rupee notes.

‘Subject to future corrections based on verification process when completed, the estimated value of specified bank notes (SBNs) received as on June 30, 2017 is Rs 15.28 lakh crore,’ the RBI said.

The RBI, which had so far not disclosed the actual amount of junked currency that had been deposited in bank accounts after the shock demonetisation announced by the Modi government on November 8 last year.

Post-demonetisation RBI spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and other denomination notes which is more than twice the Rs 3,421 crore spent in the previous year.

The RBI also stated that just 7.1 pieces of Rs 500 note per million in circulation and 19.1 pieces of Rs 1,000 notes per million in circulation were found to be fake in its sample survey.

After the note ban, old notes were allowed to be deposited in banks, with unusual deposits coming under income tax scrutiny.

A collateral damage as a result of rise in printing and other cost was the dividend RBI pays to the government.The apex bank said its income for 2016-17 decreased by 23.56 per cent while expenditure jumped 107.84 per cent.

The year ended with an overall surplus of Rs 306.59 billion as against Rs 658.76 billion in the previous year, representing a decline of 53.46 per cent, it said.

The government has replaced old Rs 500 notes with new ones, but no replacement for Rs 1,000 notes has been made.

Instead, a new Rs 2,000 note was introduced after the ban. RBI said there are as many 588.2 crore of Rs 500 notes in circulation as of March 31, 2017. As of March 31, 2016, there were 1,570.7 crore Rs 500 notes in circulation.

As many as 328.5 crore pieces of new Rs 2,000 notes were in circulation as on March 31, 2017.
Besides, new Rs 500 and Rs 2,000 notes, the RBI has also circulated new Rs 200 notes last week.

Former RBI Deputy Governor R Gandhi said demonetisation will have long-term impact. Expectations of various quarters that sizable portion of the demonetised currency won’t return has not been fulfilled.

When the announcement was made, many people took to Twitter to vent fury.

Sagarika Gose labeled it a ‘gargantuan disaster’ and said: ‘Lakhs lost livelihoods, wages frozen, over 100 died and eos 99% currency back? Black into white?

Shekha Guptar said: ‘Figures reveal a non-secret, that as economic measure #demonetisation was a disaster.

By hiding info for so long RBI further harmed its name.’ Also complaining about the delay in the results of demonetisation, Shirish Kunder said: ‘Why have they released the RBI report on demonetisation now? What are they trying to distract us from?

Tejashwi Yadav added: ‘They will come up with another series of excuses, defame opposition and bury their own sins.’

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