The Big Story: They do it with numbers

Ever since demonetisation struck, a wondering public has been stunned by big numbers. Eighty six percent of the entire value of Indian currency sucked out one November day, a grand churning of the oceans that was meant to end corruption and decimate the black economy, take out fake currency notes used to fund terror, make India a tax compliant nation. Later, the government claimed it was really about moving to a cashless economy, as it flashed number after stunning number. So let’s talk numbers.

First, as it rolled out demonetisation, government sources calculated that with the demonetisation of Rs 500 and Rs 1,000 notes, about Rs 3 lakh crore of currency would not return to the banks. This currency, presumably all black money, would then be extinguished, considerably lightening the Reserve Bank of India’s liabilities. Now, the RBI’s annual report has revealed that Rs 15.28 lakh crore of currency had returned to the banking system by June 30, that is about 99% of the total value of currency in November 2016, pegged at Rs 15.44 lakh crore. This could mean two things, either that cash was a much smaller fraction of the black economy than the government had estimated or that a large part of it was laundered into white and put back in the banking system. Arguably, this will enable government to use surveillance to detect black money and draw it into the tax net. But does an already overworked tax department have the capacities to investigate it? Reports would suggest not. Meanwhile, the RBI report says suspicious banking transactions rose by a whopping three lakh in 2016-’17. Besides, a McKinsey report finds that 10 months after demonetisation, India’s vast shadow economy remains undiminished, and bribery is still thriving. Most of these bribes are gifts of land, houses, luxury watches, expensive foreign travel.

Second, the government raised the spectre of fake currency smuggled in and out of India’s borders, funding terror and distorting the country’s economy. Ten days after demonetisation, the government claimed that the circulation of fake notes, worth about Rs 400 crore at any given time, had ground to a halt. Nine months after demonetisation, it revealed that Rs 11.23 crore of fake currency had been detected, roughly the annual income of one well-heeled corporate executive.

Third, earlier this year, the government said there had been a 25% rise in income tax returns after demonetisation. There was some confusion about the exact number of tax payers added. The finance minister claimed 91 lakh new tax payers had been added to the tax next, the prime minister said 33 lakh and the Economic Survey calculated 5.4 lakh. It was eventually clarified that these were figures related to different contexts and time periods, and that 33 lakh tax payers had been added post demonetisation. However, analysts speculate that other factors could have spurred the spike in returns: the government’s voluntary disclosure scheme last year, a rise in taxable salaries, even the drive to link PAN cards to Aadhaar could have pushed people into the tax net earlier this year. It is also not known whether the new tax payers are higher earners or those in the Rs 2.5 lakh-Rs 3 lakh bracket, and whether it has meant a substantial increase in tax revenues.

Finally, as other rationales melted away, the government touted the grand project of going digital, of ending the “anonymity” of cash, as Finance Minister Arun Jaitley put it on Wednesday. As cash ran out immediately after demonetisation, digital transactions did rise exponentially. But as cash flow returned to pre-demonetisation levels, digital transactions declined steadily. Most Indians have returned to cash for their day to day needs. Cashless transactions hit a “new normal” of 27% in May and June, according to one report. This is higher than before, certainly, but still a far cry from the gleaming cashless economy envisaged by the prime minister in the early days of demonetisation.

The question that remains is, was it worth it? Beyond the claims and counter-claims on the big ticket figures lies a penumbra of darker numbers: the number of jobs lost, the number of businesses that are failing, the number of manufacturing firms that have declared a freeze in hiring, the number of farmers who did not have cash to buy seeds in sowing season. Who will account for these figures?

The Big Scroll

Read’s extensive coverage of demonetisation here.


  1. In the Indian Express, Tenzing Lamsang argues that Bhutan came to India’s rescue again in the Doklam stand-off, at a cost to its own interests.
  2. In the Hindu, Danish Sheikh on how the Supreme Court’s privacy judgment can be used to push for queer rights beyond the decriminalisation of Section 377.
  3. In the Telegraph, Mukul Kesavan reads the privacy judgment’s comments on sexual orientation to find that it does not merely mean individual freedoms in a secluded space but the autonomy of an individual and “his right to use it to realize himself and protect his dignity”.


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