How Successful was Demonetisation? Four Takeaways From the RBI’s Annual Report

Demonetisation Flawed in planning not in principle

99.3% of demonetized-notes worth Rs. 15.31-lakh-crore returned to banks: RBI

"SBNs (specified banknotes) were received by the Reserve Bank either directly or from bank branches/ post offices through the currency chest mechanism".

Interestingly, compared with the previous year, there was an increase of 35 per cent in counterfeit notes detected in the denomination of Rs 100, while there was a noticeable increase of 154.3 per cent in counterfeit notes detected in the denomination of Rs 50.

The demonetisation of Rs 500 and Rs 1000 notes in November 2016 had prompted the RBI to print new currency notes.

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The Reserve Bank of India's annual report for 2017-18 said more than 99% of the Rs. 500 and Rs. 1,000 notes, which were withdrawn from circulation in November 2016, had been returned to the central bank. Experts say, that having a large number of Rs 2000 notes in circulation would have defeated the goal of demonetisation, which was to stop circulation of black money.

In 2017-18 (July 2017 to June 2018), it spent another Rs 4,912 crore on printing of currency, the annual report said. Over 100 lives were lost. In the immediate aftermath of the demonetisation measure effected in November, 2016 the government had claimed that a sum of Rs. three lakh crore to Rs. four lakh crore would not come back to the banks, implying that it would correspond to the unaccounted money in the system.

"I suspect that the bulk of the Rs 13,000 crore is currency in Nepal and Bhutan and some that was lost or destroyed". It was supposed to flush out black money and end corruption.

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Garg said there were benefits in the process with major advantage being induction of newer notes with more security features, "virtually weeding out all the fake currency". But the goal posts kept shifting in the weeks and months since with the government citing several reasons to demonetise high value notes such as to choke terror funding, bribery, increasing tax base and checking counterfeit notes.

The total SBNs returned from circulation is 15310.73 Billion.

Thousands of SME units were shut down, lakhs of jobs were destroyed and the Indian economy lost 1.5% of GDP in terms of growth, Chidambaram said in another tweet.

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In a series of tweets, the former finance minister also said RBI figure has suggested that the government had actually demonetised only Rs 13,000 crore and the "country paid a huge price" for it. "According to the report", In the evolution of monetary aggregates, currency in circulation surpassed its pre-demonetisation level while credit growth revived to double digits from a historic low in the previous year".

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