One year of Demonetization, a surgical strike on black money which failed due to poor implementation!


by Subhash Chandra Agrawal | November 8, 2017

Objections were made, and rightly too, when higher demonization rupees 500-note was introduced for the first time in the year 1987, followed by re-introduction of rupees-1000 note in the year 2000 after being demonetized in the year 1978. No other advanced or sensible country has currency in units of more than 100 thereby elimination chances of parallel economy of black money through increased currency-circulation because of higher-denomination notes.

But unfortunately, desired effects of a bold and tough decision of demonetization could never be achieved because of poor implementation. It is a fact that issue of notes in denomination of rupees-2000 should have been ideally avoided. But it had to be printed as a short-term measure for urgency of immediate replacing of demonetized currency-notes of rupees 500 and 1000. Even though the government and reserve bank of India (RBI) may never disclose their intention to stop further printing of rupees-2000 notes, yet it is clear by introduction of much-required denomination of rupees-200 notes, that agencies may not be printing ruupees-2000 notes in future.

Disclosure-scheme allowing about 50-percent amount of demonetized currency being credited in accounts of those disclosing, if would have been announced by Prime Minister in his famous speech of 08.11.2016 announcing demonetization, would have been tremendously successful overflowing public-exchequers, and giving tension-free environment to those disclosing. But by the time the scheme was announced, most people with demonetized currency had exchanged their notes on high commission like 30-40 percent which otherwise would have given a net revenue-earning for the government.

It was extremely faulty decision to allow too many Identity (ID) Proofs like Aadhar-Card, Voter-Card, Driving-License, Passport etc for limited exchange of demonetized currency. Professional people took money for standing in long unending queues for exchange of demonetized currency by presenting a new ID every time. People go for voting in one single day without any such long queues. It is a matter of study how and why such long queues were there continuously day and night for so many days when number of banks and post-offices exchanging demonetized currency were multiple times number of polling booths, clearly indicating large-scale manipulation in currency-exchange.

Currency-crunch could and should have been avoided by allowing old demonetized currency being accepted at all authorized centers like Mother dairy boots, Kendriya Bhandaar, Petrol Pumps and others during complete period of demonetization from 08.11.2016 till 31.12.2016. Probability of little misuse could have prevented complete nation standing on roads causing big hardships.

It was not good that central government and Reserve Bank of India (RBI) broke their promises regularly like by not accepting demonetized currency for exchange at RBI till 31.03.2017. Even in later days of December 2016, central government suddenly required banks to ask source of deposit of demonetized currency, though the circular was later withdrawn. Even though big newspaper-advertisements were given that no questioning would be done about source of demonetized currency deposited in banks by an individual upto rupees 2.5 lakhs. Yet later central government changed its mind by requiring deposits above rupees 2 lakhs to be declared in Income-Tax returns. All this gave both central government and RBI bad name of not keeping promise.

Any good effect of demonetization was later undone by removing all restrictions on cash-withdrawals from banks by individuals which were rightly imposed during period of demonetization. There must be cash-withdrawal limit of say rupees 96000 per month from banks by an individual which may be gradually reduced to rupees 50000 per month to effectively check parallel economy of black money, which unfortunately has re-emerged after demonetization. Likewise it is not sensible to raise limit for jewellery-purchase (real and artificial) without PAN-card from earlier rupees 50000 to now rupees 200000.

The Writer is an RTI specialist and Guinness Record holder for most published letters in newspapers