Demonetisation was ill-conceived, Modi must apologise to people: Uttam Kumar

Hyderabad: Nalgonda Congress MP N Uttam Kumar Reddy said that the Bharatiya Janata Party (BJP) government has finally admitted that it has failed in achieving all the objectives of demonetisation, implemented in November 2016.

Uttam Kumar Reddy said that demonetisation failed to achieve its objectives of curbing black money, eliminating counterfeit currency, and promoting digital payments.

Reddy said, “The data has proved that the demonetisation was an ill-conceived and poorly executed move which had severe economic consequences.”

He demanded that PM Modi apologises to the nation for causing hardship to the common man while executing a disastrous plan in a press release on Monday.

“The statistics pertaining to Currency in Circulation (CiC) and the value of Notes in Circulation (NiC) provided by the Finance Minister clearly shows that none of the objectives of demonetisation was achieved by the Modi government,” said the Congress leader.

The data was provided as a part of the written reply given by Union Minister Nirmala Sitharaman to a question raised by Reddy during the Question Hour in the Lok Sabha on Monday.

“Demonetisation was supposed to reduce black money by reducing cash in circulation. However, after demonetisation, the cash in circulation has continued to rapidly grow. Even relative to the size of the economy, the ratio of cash to Gross Domestic Product (GDP) has grown from 8.7% in March 2017 to 13.7% in March 2022,” said Reddy recounting the details of the data.

Objectives of demonetisation:

The Finance minister, in her written reply, said, “The mission of the government was to move towards a less cash economy to reduce the generation and circulation of black money and to promote the digital economy”.

The objectives of withdrawal of legal tender character of specified bank notes (Rs 1,000 & Rs 500), was to contain the rising incidence of fake currency notes which were largely in circulation; to limit the usage of high denomination banknotes for storage of unaccounted wealth and to contain the rising level of using the fake currency for financing subversive activities like drug trafficking and terrorism, said Reddy’s press release.

Currency in Circulation (CiC):

He said that the data clearly shows that the Currency in Circulation (CiC) and the value of Notes in Circulation (NiC) almost doubled post-demonetisation.

“While Currency in Circulation in March 2016 was Rs 16.63 lakh crores, it stood at Rs 31.33 lakh crores in March 2022. The reduction in CiC was visible only for a year when it decreased to Rs 13.35 lakh crores in March 2017,” he said. He added that the currency in circulation increased every year.

Notes in Circulation (NiC)

The Congress MP said that the volume and value of Notes in Circulation (NiC) have increased significantly post-demonetisation. “The volume and value of NiC in March 2016 were 9,02,660 lakhs and Rs 16,41,500 crores respectively. It increased to 13,05,326 and Rs 31,05,721 in March 2022,” he added.

“What was the impact of demonetization after it caused immense suffering to almost all citizens of the country? It was supposed to handle black money by reducing cash in circulation, but clearly, the cash has not been reduced,” said Reddy.

Black Money:

Uttam Kumar Reddy said “Prime Minister Narendra Modi claimed that demonetisation was aimed to curb the circulation of black money, which is generated through illegal means such as corruption, tax evasion, and money laundering. However, the move did not result in the detection of a significant amount of black money,”

“According to the Reserve Bank of India (RBI), around 99.3% of the banned currency notes were deposited back into the banking system, which means that the holders of black money were able to convert their old notes into new ones,” He said.

The Congress MP said that the government’s efforts to track down black money holders through various measures such as the Income Declaration Scheme and the Benami Transactions Act were also not very successful.

“Is it true that the majority of black money has always been held in gold and real estate, and it continues to be held that way while the government chose to target only cash which primarily harmed salaried class and small businesses which rely on cash?” he asked.

Counterfeit currency notes:

Questioning the government on the steps it has taken to counter fake currency, he said, “After falling in 2020-21, counterfeit notes recorded a 10.7 percent uptick in 2021-22, with the Rs 500 denomination fake notes rising by 102 percent. Fake notes of Rs 2,000 increased by 55% in 2021-22 over the previous fiscal year, as per RBI’s Annual Report of 2021-22”.

“It led to an economic slowdown, which resulted in job losses and reduced consumer spending. The cash crunch led to a decline in consumer spending, which affected several sectors such as retail, real estate, and hospitality. The informal sector, which relies heavily on cash transactions, was hit the hardest,” said Reddy.