Demonetisation Anniversary LIVE updates: Manmohan Singh calls note ban ‘ill-fated, ill-thought’, says ‘scars’ inflicted by decision getting worse by the day

Demonetisation Anniversary LATEST updates: Arun Jaitley, in his blog, wrote that “an ill-informed criticism” of the demonetisation is that almost the entire cash money got deposited in the banks. However, he wrote, that “confiscation of currency was not an objective of demonetisation”. “Getting it into the formal economy and making the holders pay tax was the broader objective,” Jaitley said.

Former prime minister Manmohan Singh has called the note ban an ‘ill-fated and ill-thought of exercise. Singh said its ‘wounds’ are becoming more visible with each passing day.

However, it is unfair only to look at the negatives of demonetisation. Regardless of the tangible results, this was the biggest crackdown on parallel economy modern India ever witnessed and no one doubts the intention of the exercise. Without a doubt, this led to the creation of a more formalised economy. Most of the money in circulation can be now raced to the sources and taxmen have a better grip on those who have deposited illicit money in their bank accounts.

The RBI had only a secondary role to play throughout the demonetisation episode. While its role in deciding the launch of demonetisation was understandably limited, the unenviable task of implementing the programme was completely entrusted with the RBI. This wasn’t easy for the central bank. Several circulars were issued and rolled back. Most of the decisions were taken on the go. The huge public unrest that followed in the later months on account of mega problems in depositing and withdrawing money put the regulator, and the banking system as a whole, in a spot. The mayhem continued for a long time. Those who criticised the central bank heavily for its handling of note ban included former RBI governor, YV Reddy, and one of the former deputy governors, Usha Thorat. They cited the reputation loss RBI, as an institution, suffered throughout the whole episode.

The biggest achievement of demonetisation is the mainstreaming of the economy with GST adding weight to it back-to-back and crooks caught with their pants down. The collection of GST on the back of demonetisation has also gone up crossing the Rs 1 lakh crore mark per month many times over. Direct taxes collection too have gone up.

Two years ago, Narendra Modi launched demonetisation with three objectives to begin with–terminating black money in cash, killing fake currency and put an end to cash-based corruption. The objectives were noble and welcome in an economy where a parallel economy was thriving. The operation itself was unheard in such a scale in any comparable economy. About 86 percent of the cash in circulation vanished in one go when Rs 500, Rs 1000 notes were declared invalid. Till date, there is no hard evidence that demonetisation achieved any of the three initially stated objectives in the desired manner.

What suffered worst during the attack on cash was the cash-intensive industries and SME, MSMEs. When cash significantly disappeared from the system for a good 3-4 months, supply chains were taken a major hit. Things improved when cash returned to the system but many failed to survive. Reports emerged of several micro-units shutting shops which inevitably meant job losses and, in turn, demand slowdown.

Asking Prime Minister Narendra Modi to apologise to the nation for demonetisation that “wrecked” the economy, the Congress on Tuesday said it will observe a nationwide protest on Friday to mark the second anniversary of the note ban.

File image of Manmohan Singh. PTI

File image of Manmohan Singh. PTI

“Two years ago the Prime Minister announced demonetisation and gave three reasons for it – to curb black money, weed out fake notes and proscribe terror funding. Two years later, none of those objectives has materialised. “In fact, there is more cash in circulation today than it was two years ago when Modi announced demonetisation,” Congress spokesperson Manish Tewari told the media here.

The Congress leader said that Modi should apologise to the people of India on 8 November (on the second anniversary) for his “Tughlaqian decree” of demonetising Rs 1,000 and Rs 500 notes, then in circulation.

“The Prime Minister should apologise to the nation on 8 November 2018, at same time for ruining and wrecking the Indian economy,” said Tewari, adding that Congress leaders and workers will come out on the streets across the nation in protest against the “complete demolition of the Indian economy by this Tughlaqian decree of demonetisation”.

Congress president Rahul Gandhi has time and again slammed Modi government’s demonetisation move and the introduction of the Goods and Services Tax. Rahul had who referred to GST as Gabbar Singh Tax, said the government has destroyed the country’s economy with decisions like these.


Leave a Reply