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Modi’s decision surprised some economists, who argued that only about 5
percent of back money is stashed in the form of currency. The remainder is
in the form of other assets such as real estate and gold, they argued
There were three economic objectives that were offered as the rationale
behind demonetisation—wiping out black money, eradicating fake
currency notes and creating a cashless economy by pushing digital
transactions.
Among those targets, the biggest one was tackling black money.
Six years after the demonetisation move, has India achieved any of the
stated targets? Let us take a look with available data.
Black money hunt—a failure
Did demonetisation achieve the target of ending the killing black money
economy? According to Reserve Bank of India (RBI) data, almost the
entire chunk of money (more than 99 percent) that was invalidated came
back into the banking system. Of the notes worth Rs 15.41 lakh crore that
were invalidated, notes worth Rs 15.31 lakh crore returned.
How much black money has been recovered since the note-ban
exercise? This is difficult to assess as there are no recent estimates of how
much black money was recovered since demonetisation.
In 2016, the year when demonetisation was launched, 6.32 lakh counterfeit
pieces were seized across the country. In the next four years, a total of
18.87 lakh fake notes were seized across the country in various
denominations, according to RBI data.
Cash is king
Later, the creation of a cashless economy was pitched as another major
target of demonetisation. How has this picked up? Cash has proved that it
remains king in the post-note-ban years. As per RBI data, currency with
the public increased to Rs30.88 lakh crore as on October 21, 2022,
from Rs17.7 lakh crore on November 4, 2016.
At Rs 30.88 lakh crore, currency with the public is 71.84 percent higher
than the level for the fortnight ended November 4, 2016.
Debates still rage about whether the note ban was a prudent step in the
Indian economic context. While there certainly has been a discernible
uptick in digital payments, it is doubtful whether the elaborate exercise to
unearth black money—the stated and primary goal of demonetisation—
was worth it.