'Some don't understand the objectives of demonetization,' said Finance Minister Arun Jaitley
New Delhi: Indians have returned almost all of the estimated Rs 15.44 lakh crore ($242 billion) in currency banned by Prime Minister Narendra Modi in a shock move in November, the Reserve Bank of India (RBI) said in its annual report on Wednesday. The Finance Ministry, in a statement, said a "significant portion" of it could be black money. The tax authorities have found undisclosed income of Rs 17,526 crore and Rs 1,003 crore has been seized so far, the statement said. Fending off criticism that the notes ban failed to deliver on its purpose of tracking black or untaxed money, Finance Minister Arun Jaitley said: "That was not the objective of demonetization...it was not an exercise to confiscate money but to nudge India towards digitization, ending anonymity of cash."
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India received a total of Rs 15.28 lakh crore in banned 500 and 1,000-rupee currency bills, the RBI said, which means 99 per cent of the banned cash has been legally returned in the eight months since demonetisation. The one per cent that has not returned to the RBI adds up to around Rs 16,000 crore.
While declaring Rs 500 and 1,000 notes illegal in one stroke and imposing restrictions on how the money could be returned, the government had said it intended to choke tax evaders and hoarders of undeclared wealth or black money. "This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency," PM Modi had said in a televised address to the nation.
In the days following the notes ban, millions of Indians queued up for hours at banks and ATMs for cash. A shortage of new currency - and a delay in the recalibration of ATMs - meant that it took months for the cash crunch to ease.
But it seems that nearly all of the cash was returned by individuals, implying that there was a very small amount of unaccounted money held in cash by those seeking to conceal it.
"Some don't understand the objectives of demonetisation... The effect has been extremely positive in terms of expanding the tax base and more digitisation," said Mr Jaitley, adding that terror funding had also been curbed. The senior minister also described as a "speculative statement" the Attorney General - the government's top lawyer - saying in the Supreme Court in December that 10-11 lakh crore was expected to be deposited after notes ban.
After demonetisation, growth eased to 6.1 per cent in the first three months of this year, its slowest pace since late 2014 as large parts of India's economy was dependent on cash transactions.
Some economists have highlighted the positive impact of demonetization including bringing in cash into the banking system, and therefore lowering the cost of loans.
Opposition parties tried to underscore disruption caused by demonetisation but failed to dent the appeal of PM Modi and the BJP, which has since collected key electoral wins, including a victory in Uttar Pradesh earlier this year. The BJP said the victories proved public confidence in the Prime Minister's pledge to fight corruption.
The Congress has seized the RBI figures to target the government once again. Former finance minister P Chidambaram sneered that "economists behind demonetisation deserve a Nobel prize". The notes ban, he said, "not only dented the institutional sanctity of RBI, but also credibility of India abroad. The PM should apologise to the nation....Shame on RBI."
Earlier this month, amid repeated questions about how the notes ban had helped curb black money, PM Modi said in his Independence Day speech: "The note ban, according to independent research, helped bring Rs. 3 lakh crore of unaccounted wealth into the banking system." The Congress questioned the math.