It should appear strange that almost the entire lot of the demonetized Indian currency notes has returned to the RBI, after their epic scrapping in November 2016. The dramatic announcement by Prime Minister Modi in an address of the nation at night then had raised high expectations that it would help the nation overcome the problems of fake currency circulation, hoarding of black money, and tax evasions. The annual report released by RBI this week states that about 99.3 per cent of the banned notes have come back to the central bank.
This goes to show that all those who hoarded currency notes have managed to turn them white, by having them exchanged for new currency through the banking system. Once such hoarded money – certainly huge
sums – streamed in, it will now be incumbent on the money-holders to show how they had made as much money, and also how they would use this money. Having had as much of earnings – accounted or unaccounted – would mean they have to pay due tax to the government. The government stands to benefit immensely, but if only the taxmen do their job properly.
Nothing however goes to show India has an efficient bureaucracy, and this is true also of the tax department. Neither are our banking systems running in very responsible lines in recent times. Put together, there is a big question mark on how much real benefit the nation would derive from the formal accounting of what was also
suspected to be hidden wealth in the form of currency in the hands of the super-rich and the business class.
The claim made by the Modi government at the time of the Demonetisation of high value currency notes that over Rs 3 lakh crore of black money would perish and would not return to the banking system has proven to be terribly wrong. The consolation, however, is that this money too has turned white. Elaborate exercises by taxation and other official agencies including RBI are required to extract the benefits thereof to the nation. The RBI would do well to also investigate as to how the expectation about Rs 3 lakh crore in black
money perishing did not come true.
The government itself should shoulder considerable blame. It kept extending the period for return of banned notes, for exchange with new notes. There really was no need to give hoarders a long rope.