you're watching. Reality cheque. Tonight is the fifth anniversary of the Note Bank, a dramatic move in November 2016 when the prime minister came on TV to announce a ban on high value currency in a single stroke, hailed at that time as a game changer. But today, five years on, the government is totally silent on its suppose it master stroke, while note ban d wass so to speak, is trending thanks to the critics of the decision, widely described by them as a disaster right from the start, assessing the target of the note ban. Was it, it is asked. Her was in a game changer was always a challenge, since the goalposts kept shifting from reducing black money to making India cash list and so on and so forth. So far, our reality cheque. Tonight we chose five significant aims of demonetisation, starting with the goals outlined in the prime minister's famous speech, which we edited to highlight the initial goals in Mr Modi's own words. Black money, black money, black money, black money, roll of black money and black money, a plaque, money, black money and black money. This fight against corruption, corruption, corruption, corruption and corruption on through corruption, corruption against corruption to the correct pick currency. Take ₹500,000 notes paid. No state comings in jobs and fake currency. Problem of terrorism, terrorism and terrorism, terrorists, terrorism and terrorism. So black money mentioned 17 times 17 corruption, 16 times fake currency and terrorism five times each. These were the initial goals. What's the claim and watch? The reality for the claim was that black money will be eradicated. The reality was that over 99% of the cash returned back to the banks. So if the rupee is 15 point for lakh crores, which was out there in the economy, 15 3 lakh crores came back. According to the RBI data. Huge tranches of black cash which was supposed to be thrown into the river or burnt or discard it never quite happened. The second claim from the prime minister's initial speech that the note ban was meant to curb terrorism. The reality is that there was no dramatic drop in terrorism despite the north back. Let's look at the data for Jammu and Kashmir, India's most terror prone state, starting from 2014 if one looks at the figure 2016 it was 322 Incidents started to climb, hitting 600 incidents in 2018 2019, almost against 600 finally before falling in 2020. Claim number three Eliminating fake currency notes. The reality of this that of all the band cash only rupees 58 crore Fake currency was detected since 2016. 17, which is less than 170.4% of all the lakhs and crores of demonic ties currencies. All of that was wiped out, ostensibly just to detect this fractional amount. The government therefore soon started moving the goalposts, claiming that the idea was to move to a less cash or cashless economy. The reality is that cash in circulation today has surged 64% since the north back the cash in circulation on November 4th. 2016 just before the announcement. ₹2.18 lakh crores. October 29th 2021 is almost 30 lakh crores of the amount of cash that circulating in the economy. The final significant goalpost was at the note ban, and this is again new goal posts. The note ban was meant to usher in a digital economy. Now hear the record seems more know and for the claim is, of course. Note. Ban to usher a digital India The reality is this that digital payments did rise after the note band, but and there is a But there have been pre note banned years, which actually saw similar, if not higher percentage growth of digital payments. Let's look at the chart starting from 2012 13, about four years before the note back. And as you can see, we go big screen. 2012 13 have actually 30% of then it came down 10% 5% 10% and then from 2016 17 onwards had started growing at about 20%. But then again, in 19 and 20 it fell by percentage. And of course, it then fell more significantly because of the pandemic. So that's the storey of the claims and the reality of note bank. Joining me tonight. Rajesh Kumar, former chairman, State Bank of India, India's biggest bank we have with us Ashwini Deshpande, professor of economics at Ashoka University. Gaurav eloped, spokesperson of the Congress is with us and pick Kari Nambiar. Political analysts support BJP, Ashwini responded, when one looks at it now in terms of, As I said, it's hard to actually pin down a goal because the goalpost kept shifting. But if you look at the facts tested against even the shifting goalposts on almost every count, whether it's to do with turning us into a cashless economy or whether it's to do in terms of eradicating black money note, Pan seems to have failed and with tremendous human consequences. She Jameson. You're absolutely right. And you gave all the right figures to show how, even against the stated claims of the government, the the note Bandon really was d monetisation. On top of that, the human cost the suffering to the people of India has been enormous impact. We won't ever know the the widespread devastation that note bank cause. Because India is largely an informal economy. A very large proportion of India's workers work in informal enterprises or they work in formal enterprises but at themselves, informal workers. And so this is the reality of India. The formal sector constitutes act most 25% of the workforce, and that's a very generous estimate. The informal sector deals in cash was reading the state Bank report recently and I was shocked to see and a road that doubt that the in formalisation of the economy is a issue of data capture compliance issues as if people are choosing to work in the informal economy because they don't want to comply with regulations. That's a completely wrong way of looking at the Indian economy. It's without empathy. It's without an understanding of the underlying economic structure. So an economy where small cash is what is needed for the livelihoods and daily needs of millions of people. Right when you ban notes overnight this tremendous human cost, right? And my you know, I've done some research now on the impact on women's labour force participation rate, along with my student Jitendra Singh and the Find actually that women's labour force participation rate that was already declining after the November 2016 note ban. It fell by a further 2% points related to the mail Labour force participation read. This is an you know, So there are all kinds of many, many, many repercussions. Rajesh Kumar, Let me come to you. You are the author, most recently of a custodian of trust, A banker's memoir. Now let me ask you this because on one hand you have this huge human cost. But if the goals were met not that that mitigates the cost, you at least say okay, But as a banker, you work. I believe in the saddle. When the announcement happened, cash started coming to the banks. Were you, in the end? Surprised at all to find that actually, contrary to the claims that locks of crores of cash would not return to banks. And that is this great amount of section of black money that we get wiped out. 99.9% money actually came back to the bank. No, that is the ingenuity of the Indian people. Let me put it this way. Because you had a very large population and with bank accounts and the people they found a way of generalising their cash, the weather was black. Money or not, that is a different issue, because the definition would be of the black money is about that. Whether you are paying taxes and you're declaring in cash was not necessarily main Blackman. So that is the one thing, but yes, dim. Bonnie got journalist into the into the banking system that is the reality in this gave. So then it No, just just so basically large number of people out of like, say, 1 39 crore people. There are at least 101 110 crore people who live on a very legal resources. I'm putting 9000 10,000 ₹50,000 in their account. So the people found the people who have the cash with the money. So they're found various ways and that were like it was the genius of Indian people that go, let go there. But the the cash told banking in that case that speaking MBIA's we come back to the burning question What is this achieved? And I guess in a way, if you look at the facts, not very much does that explain why the government the BJP is now completely silent on the d monetisation mean is that more than 2.1 lakh crew of one lakh cos they are basically paper companies which are only used for transacting money from here, and dirt have been scrapped or being over. There were all paper companies who are only doing the dubious the building exercise. We all know that how it is equal, that they have been wiped out from the system. So anyways, that now you you listed another goal post. See, that's the whole point. Now you're talking of paper companies, the name not even part of the prime minister, you know, bringing up aspects which are not even part of the prime minister's claims. I am saying that I just go by what the government's initial claims were changed on a daily weekly basis, everything from fighting terrorism to eliminating black money to saying will going cashless, whereas happened cash in circulation has increased 64%. I think these companies were these shell company voting paper companies was one of the reason being for the terrorist activities very well known. And you can ask the countries they will also now coming to the second part of more than 1.8 lock accounts are under observation or under scrutiny examination for the black money because once the money as the former chairman was talking about the, um, the money find out that the monies are have been Masti 11 point so much, then I am saying how much of these accounts because we've been hearing about these accounts from day one because the goalpost shifted. It was first to eliminate the cash in the system, the hoarded cash. Then it changed to know we actually wanted the cash to come back. So now is scrutinised to see what is the black and waiting to hear from the government of these locks of accounts. How much money has found to be black, and it's not fair to ask you because I don't think the government has disclosed that information to anybody you are a long with you have an answer. I'd love to hear it because I usually allow me to have one. How much cash was discovered in these accounts? I am saying that overall effect, maybe I maybe bad affect may not have seen all those I. But having said that, you still some positive not back to because although there's a bit of an audio issue, I'll use any time while we're talking a bar of olive will just get that fixed. One. Pick a deal, just come back to using God. Of all of at least, you have unusual instance of a spokesperson of person representing the BJP saying, Listen, it may not have all been great but at least there were some positives. But you the Congress Party has said overall unmitigated disaster a cinemas. I will start with two dates which had changed the Indian economy forever. The first date was July 20 for 1991 when the time Finance Minister Dr Manmohan Singh gave liberalisation privatisation in globalisation to our economy and the second date and this date I call as a black day for Indian economy. That is November 2060 and I will give you the reasons at in that year. Senior In that year, 16 17, our GDP growth was 8.3% and before Karuna for the financial year 1920 that was 4.2%. What happened in between this be a what happened during that only one event had happened. That is demonetisation 18 ₹lakh crore with the currency in circulation at that time of at that point of time today it is 29 lakh crore. It means 64% of jam is head over. GDP increased by 64% as per my data which has increased by 11% because the GDP number for the year 2016. 17 was 1 21 lakh crore. Right? But the order 1 35. Okay, but the argument being made is OK. All that may be but political parties particularly like yourselves. Opposition parties were upset because all of you was sitting on black money which got wiped out. I'm asking because the government was of BJP on that. Then today also how much black karma Li you have confiscated from any political party. I am raising this question. The gentleman here Mr Nambiar had raised Ki we had we had reduced the shell companies. Can he prove that demonetisation is anything to do with the identification of shell companies? That was another exercise. He is not aware of the fact only what what happened? Who is the is the person who who had been adversely fact it? It is the Indian economy, the inclusive Indian economy. Come back to me and I want everybody I will come back to But Ashleigh next Monday as he was saying that government may be silent, but five years later, the tremors of D monetisation continue to be faced, particularly by the poor informal sector, as you mentioned women's labour force participation has fallen. But the curious thing Ashwini Deshpande is that despite that, Indians heavily still depend on cash that they have actually gone back, even though it was meant to give people a scare that you you should be actually transacting in cash and keep it cash stockpiles. It almost seems of and the liver. And also, in fact, you have been giving figures of absolute amount of cash in circulation. If you see the cash to GDP issue in the fiscal 2021 it's 14.5% and in 2068 to 11.6%. So as a proportion of our GDP, the cash and circulation has gone up has actually increased post demonetisation. That's one second immunity. People are talking about corruption, black money, etcetera, etcetera. If the Monetisation had to have the impact of increasing formalisation and increasing widening the tax net, making the money whiter than tax to GDP, racial should have shown an increase. If anything, between 2017, 18 and 2021 tax to GDP ratio has marginally declined tax to did not absolute amount of taxes tax to GDP ratio on both of these towns, even taking forget about the human suffering in the faith. But even when you look at cash to GDP and tax to GDP rations, that's the BJP has fallen cash to GDP has increased and outcome which flies in the face of all the arguments that made in favour Rajesh Kumar. Because actually, we didn't even get into other claims, which was that this is going to increase greater tax compliance. We fact cheque those on the past. As Ashwini points out there, first effect seems to be the Rivers as a banker, how you explain this paradox that, far from actually winning Indians away from cash, the appetite and the use and the circulation of cash has jumped since? Not bad, no, I think Convene one is convenience of cash. The second is again. I'm saying that in terms of the digit ical transactions, India can be proud of its achievement. There is no doubt about it. There is nowhere in the world is system like right, which India has big? Yes. So, apart from what the economists say or political debate yes, my take is that on one single decision and on economy, its impact you are trying to map it that one single decision and this one are the outcomes. But my take is that during the last five years there several decisions of the government and cove. It is a decision of the God, so it deserve the combination of at least five major factors of today impacting the Indian. Ignore one was demonetisation, of course. The other is GST, our introduction of insolvency court. Then you have covet So when you'd analysing on impact on the economy and the directions. And if you are saying that if the claim is that it is a Hamas and which would eliminate all the problems, then that narrative obviously would not be demonetisation has not proved to be of the mask which would eliminate all the problems. But the fact is, and I am I am not giving your comment is in impartial observer. He has nothing to do with politics. And I have don't have economics. I was practising bank. Yes. So if you have to attack terrorism, for example so one Yes. Okay. Like you have to cut the funding sources, right? So whatever I have read in the newspapers or keep on reading. There has been a very systematic effort to cut the sources of funding. We are moved in. That is, I think, a little bit more expression. Then I'll come back to a bit iffy even when you talk of cutting the sources of funding for terror. This is something which didn't start with D Monetisation. This is something that has been going on for a long time. And this is not necessarily something. Of course it could be one demonetisation. I agree. But communication guys, I don't see that when you when you when you make a I am saying when you were only assessing claims made by the government against the magnitude of the steps. When you are cancelling 90% of currency in circulation that a massive, massive shock to the system, then you have to be very clear about what you're setting out to do. It can't be business as usual. If you look at the data on terrorism, look at any of the data. It's not showing any big change or shift post d monetisation so that the the cost benefit analysis of inflicting so much pain on a population of our size and assessing What's the game by Storey? I need to allow now, but we are just 11. Yemen. Answer. I will give you just from my practical experience. And then you can go to others because, as I said that I am not a political persons who but the reality is and I mentioned in my vote then when I was talking to the people over is standing in the queue. Surprisingly, they were willing to beer that pain because they're sincerely believed that it is a decisive strike against. I am telling you and conveying you what I from the people standing in the I'm I'm, I says have gone in the I have covered those cues. I heard people's views, but in a democracy that the job of the media is to is to test views and opinions and emotions and sentiments with hard facts. And that's what we're trying to do tonight, P. K nambiar coming to you, this whole idea where not just a mean forget tax collection, which has not seen a dramatic shift. As Ashwini said, cash to GDP ratio has actually gone up even growth. India was taking along just fine, and over 8%. We put that growth chart up again. Look at what happens after d Monetisation again. It may not be the only reason. As Nish Kumar said, there was so many factors, but far from actually even achieving some of its goals, dah monetisation may have contributed to hurting India's growth. I think you're on mute. Sorry, I think you're on mute. Okay? And the fact future saying may not be completely true. It may be partly corrected. Partly incorrect for an example. Government data There is no disputing. I am only saying that for an example, our income tax collections have increased by 71% days. Why it has happened because formalisation of economy has taken place. It's the monitor, say said. There may be a lot of flaws which may happen because this is the first time which has happened something like this in such a bag gratitude in such a surprising ways, there may have been some flaws where, I mean, I think it will be too immature form. You say that everything what happened in do monitor session was good, but one thing you need to understand and accept today we are a much better formalised the economy and formal is no. No happen because of you know, you can't say that. You can't make these statements at least. Sorry. On my show without facts. You mentioned Tax Ashwini just finished telling us tax to GDP has actually fallen Number one and a caramel or Bella nation. The fact that there is more cash in circulation, 64% increase. Actually, this is a question. What was the number of bank records in Indians had before V. D. Monetisation, and to do with a accounts were already increasing. It had nothing to do with the monetising. That is, that have a proper, proper a banker sitting on the show Tell me what it was. The number of accounts you had have that has nothing to do with demonetisation that is jammed with happening with the economy's who you wanted to hear Only that I would like to make it if I did. If I did, if I only wanted to hear an echo chamber. Pickering, I will be call you. So that's not out of time. God, of all of we have you back, we will continue to keep an eye on this and other big storeys here on reality cheque. Thank you for watching. Goodnight.
