Sree Iyer analyses Demonetisation, five years after, if it was a success or a failure

Recent data released shows Cash in circulation in India is more that what it used to be in the UPA area. This should set alarm bells ringing in the RBI and in the Finance Ministry. In this sharp video, Sree Iyer details why,

Namaskar. At the outset, I humbly request you to Like this video. It is good, I guarantee it… and it concerns our wallets. I hope this has got you interested.

A tweet by Dr. Arvind Chaturvedi of Virat Hindustan Sangam piqued my interest – was Demonetisation a failure or a success? Did it achieve its objective of denting Black Money? Before arriving at an answer, let us look at this chart to my left –

What is a good ratio for Cash in circulation vs the GDP? About 10%. Remember that cash in circulation is typically about 10X or 10 times the money that is printed by the Reserve Bank of India, in a developing economy like India. But with Digital Banking, that was expected to come down. Instead, it has gone up. In order to find the answer, we need to have some data points:

  1. Has the Reserve Bank of India released the results of Demonetization? Has every note been counted? If yes, what was the final result? In August 2018, RBI reported that 99.3% of the Black Money came back.[1]
  2. Assume this to be true for a moment. What was the Government’s expectation? That only 87 percent would come back and that 13% will not, as it was Black Money?
  3. Let me paint you the reality at that time as I was in India. I had 20K plus money in 500s and 1000s but I was allowed to take only 10K back in new notes. The rest was deposited in my account. Assuming that the government provisioned for a one-for-one money exchange, where did the remaining 10K go?
  4. RBI could not count the money being returned from various banks – which means a lot of counterfeits could have also come in. Bank managers were taking 30 percent off to accept any currency and give new notes. Was my 10K thus passed off to someone?
  5. We know that Pak had currency notepaper that was triple its needs and was therefore printing a lot of Indian currency, which once it realized it can’t route it into India, put it in Dubai/ Nepal and other countries, which dealt with Indian currency[2]. How much came in through these countries? No details… because it is my contention that if all these are accounted for 113% percent or more came into RBI. If I am wrong – correct me, but the RBI owes the nation an answer.
  6. Now let us look at the chart again – GOI is surely not printing more money as India has taken to Digital Banking like fish to water. Then pray, why is the cash in circulation at 15 percent or so now? If the government is not controlling this, it means that the Black Money-based parallel economy has become resurgent again and is dealing exclusively in cash. Or fake currency is still being printed with new dimensions and is going unchecked. Either way, it is not good for the government and the country.

The Modi Government must publish a White Paper and come clean. The Digital Banking initiative is laudable and if RBI tries to reduce the printing of notes because Digital banking is going up, then it also means it is unable to control fake currency that is still finding its way into India. Make no mistake – Pak’s fake India Rupee looks more real than India’s. For more on this, read my book Who painted my money white?[3]

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[1] Over 99 per cent demonetised currency returned to banks: RBI reportAug 30, 2018, India Today

[2] Is the Spectre of Fake Indian Currency Coming in From Pakistan Back To Haunt Us?Oct 25, 2019, The Wire

[3] Sree Iyer Who painted my money white: When greed drives everything else and everything has a price (Money Trilogy Book 1) (English) Paperback –


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