Did Demonetisation Help? Digital Payments Back To Pre-Notes Ban Levels
- Author: Zachary Reyes Sep 01, 2017,
Sep 01, 2017, 22:43
Notably, the government chose to carry out demonetization of Rs 500 and Rs 1000 note on November 8, 2016 to wipe out blank money from the country. In an address, post the RBI's statements, the Finance Minister said that one of the principles of demonetisation was to gradually shift to a cashless economy and integration of the formal and informal economies.
"According to the Economic Survey, there is an increase in the number of tax payers, but there has already been an increase and there is no uniform increase every year depending on peoples' income". "The object of demonetisation was not confiscation of money".
Except mobile banking, transactions at portals like Immediate Payment Service (IMPS), Unified Payment Interface (UPI) and transaction of debit & credit cards has seen consistent growth.
After RBI released the demonetisation data, former finance minister P Chidambaram lashed out at the government, saying 1 percent of demonetised notes not coming back to the central bank was a "shame on RBI".
While one has to agree that a large amount of cash in the system is not always beneficial for the economy, it is also clear that the government kept changing its narrative on demonetisation as it found the radical move disrupting the economy without giving its intended benefits of extinguishing a large portion of cash in circulation.
Sharma said the Prime Minister had made "false remarks" in his Independence Day speech about the quantum of black money that was unearthed after Rs 500 and Rs 1,000 notes were scrapped. Those who have never fought a war against black money in life, they probably could not understand the objective of this whole process.
"Rs 16000 cr out of demonetised notes of Rs 1544,000 cr did not come back to RBI". It dealt a heavy blow to the informal economy; it boosted unemployment among the poorest segment of labourers; it caused massive hardships for common people who had to stand in endless queues to get just a fraction of their own earnings that had been deposited with the banks; it caused the deaths of 103 persons; and it led to a net loss of fiscal resources.
Demonetisation, which took place on November 08, 2016, was inked with several objectives. RBI's annual report also shows that the banking regulator's income for the 2016-17 declined by 23.56% while expenditure for the year increased by 107.84%.
An embarrassed finance minister, Arun Jaitley, moved in with lightening speed to defend the indefensible. "The fallout of demonetisation is on predicted lines... the fact that money got deposited in banks doesn't make it legitimate money", Jaitley claimed. The then attorney general Mukul Rohatgi stated this before the Supreme Court. "It is like money taxed at 100%". "We had an idea that the bulk of the money would come back but the present 99 percent is a surprise for most of us", he said. The RBI had to spend extra on printing notes and paying banks interest on reverse repo deposits of the huge influx of non-voluntary deposits in the wake of demonetisation, resulting in a big drop in its payout to the government. The economists deserve Nobel Prize99% notes legally exchanged!