A former bureaucrat offered a conflicted assessment of Prime Minister Narendra Modi’s 2016 demonetisation on the same day the Supreme Court approved it despite one judge’s opposing opinion.
The former vice-chairman of the government’s think tank, Rajiv Kumar, told NDTV on Monday that he didn’t believe the notes ban had accomplished everything it was intended to. He mentioned digitization as one advantage.
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Demonetization’s results were “very mixed,” Mr. Kumar stated in an exclusive interview.
“I’m not as certain of it now, six years later. I was convinced it was worthwhile when it was started, but given how things have turned out, I’d like to emphasise the boost it has given to digitisation, the expansion of the fintech sector, and the fact that we have seen a significant increase in financial inclusion in the economy, among other things. I won’t say it again, but the goal for which it was done has mostly been accomplished “When questioned if it was worthwhile, he responded.
PM Modi made it clear while announcing the notes ban in November 2016 that it was a part of a bigger strategy to fight terrorism by reducing illicit money.
But six years later, there is much more counterfeit money in circulation than in 2016.
Given the structure of our economy, the unorganised sector, the huge industries like construction, etc., the attempt to weed out the cash economy or the black money, etc., I don’t think it would have been successful, according to Mr. Kumar.
The value of all currencies increased 89% to 31,05,721 crore in March 2017 from 16,41, 571 crore in March 2016, the Finance Ministry recently informed parliament.
The volume of currency in terms of the number of notes in circulation has increased 44% to reach 1,30,533 million in March 2022, according to data given by the government in Lok Sabha.
During this time, the value of digital payments has increased dramatically, rising from 6,952 crore in 2016 to 12 lakh crore in October 2022.
The highest court’s majority decision upheld the government’s authority to demonetize bank notes of all series and the correct procedures were followed when the government banned notes with denominations of 500 and 1,000 in 2016. The ruling is a legitimate means to get rid of counterfeit money and black money, according to the court, which found that it fulfils the proportionality test. The court ruled that the 52-day window allotted for note exchange was fair.
Justice BV Nagarathna stated in a forceful dissenting opinion that the notes prohibition was “vitiated and unconstitutional.”