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99% of demonetised cash returned: Don't believe BJP spin, it's a classic case of shifting goal-posts for windfalls

The Narendra Modi government seems to have inherited Amitabh Bachchan's famous coin from Sholay. For, whichever way it falls, the government claims it has won. Its latest spin on demonetisation is yet another example of the government's 'heads we win, tails we win' arrogance.

But, economy is not cinema. So, don't believe for a moment that the government was expecting almost all of the demonetised currency to return to the Reserve Bank of India (RBI says almost 99 percent of it has come back). It was, instead, optimistic that black money hoarders would throw a huge chunk of the banned Rs 500 and 1000 notes down some drain – literally.

The first indication of the government's optimism came from none other than Prime Minister Narendra Modi himself. In Japan, on 12 November, four days after his government banned the use of Rs 500 and 1000 notes at the stroke of midnight, the prime minister was in a jovial mood.

First, he told his audience how he had made Rs 500 and 100 notes vanish. "Ghar main shaadi hai par paise nahin hai (there a marriage in the household, but there is no money)," he laughed. Then, he made another important observation. "Pehle Gangaji me koi ek rupiya bhi nahi daalta tha, par ab usi Ganga nadi me 1000/500 ke note beh rahe hai (In River Ganga, where people didn’t even donate one rupee, now there are notes of Rs 1000 and Rs 500 notes flowing)," he said to a raucous applause.

What exactly was the prime minister telling us? Listening to him back then made us believe that the government was convinced there was so much black money lying around in Indian homes that people were desperate to get rid of it in any way possible, even if it meant dumping it in the Ganges. It also underlined the government's central belief – the one it is now denying in a classical exhibition of goal-post shifting – in the demonetisation move: That a huge amount of money would not return to the system, thus, giving it windfall gains.

This optimism was expressed by the government and many cheerleaders of demonetisation. Arguing in favour of the note ban, the then Attorney General Mukul Rohatgi told the Supreme Court that of the total estimated money in circulation of Rs 15-16 lakh crore, the government expected people to deposit Rs 10-11 lakh crore.

"The rest, Rs four-five lakh crore, were being used in northeast and Jammu and Kashmir to fuel trouble in India. That will be neutralised," he had said.

This view was partly endorsed by economist Jagdish Bhagwati, a known supporter of the Modi government, who believed around a third of the total currency in circulation on 8 November was black money and out of this Rs one trillion may not return.

Turns out, reports of the death of black money were grossly exaggerated. Instead of dumping their cash – hard-earned or ill-gotten – Indians were finding innovative ways to stash it in the banks. This has now been affirmed by the RBI's report stating almost 99 percent of the junked notes were returned.

 99% of demonetised cash returned: Dont believe BJP spin, its a classic case of shifting goal-posts for windfalls

Demonetisation, with the benefit of fresh figures, has turned out to be an exercise in shooting in the dark. To create a big bang, the Modi government picked up the gun and fired in all directions, naming a few targets: black money, counterfeit currency and terror financing. It missed all of them by a huge margin.

Almost all the junked notes returned to banks, leaving the task of identifying black money to the IT department, whose job it always was from the very beginning. Counterfeit currency was almost zero percent of the returned notes. And, terror strikes have gone on unabated even months after the ban.

Midway through the drive, concerned about the flow of money back to the banks, the government argued the aim of demonetisation was a less-cash economy. This too has turned out to be a pipedream with cashless transactions staying almost at pre-demonetisation levels.

According to a report in The Indian Express, in value terms, November 2016 recorded Rs 94 lakh crore in electronic payments which grew to Rs 104 lakh crore in December, surged in March to Rs 149 lakh crore, then declined to Rs 107 lakh crore during July — a five-month low.

Now that even a lay man can see that the demonetisation coin fell on Modi government's head, leaving behind a large bump, it is busy claiming success by citing achievements that were not even part of the original plan. Only fans of Sholay will buy the government's post-truths and claims of success.

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Updated Date: Nov 03, 2017 15:46:02 IST

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