Last Updated: 6 April 2024

8 November 2016: A Shocking Announcement by PM Modi in the night.

With less than 4 hours' notice, 86% of total currency in circulation in form of ₹500 and ₹1,000 notes was rendered “worthless pieces of paper”

FAILURES

-- Mere 0.7%(₹10,720 crore) of the Rs 15.41 lakh crore demonetized cash did not come back to system^[1]
-- Cash in circulation doubled from **₹17 lakh crores (Nov'16) to ₹33 lakh crores (Oct'23)^[2]
-- GDP growth fell for 5 successive quarters from 9.67% p.a in July-Sept 2016 to 5.32% in July-Sept 2017^[3]
-- Millions of jobs lost and 1000s of MSMEs closed^[4]

SCAMS under the hood?:

-- Before Modi banned Rs 500 & 1000 notes, BJP was busy investing in real estate; even up to 1st week of November 2016^[5]
-- Rs 3,118 crore deposited in 11 Gujarat banks linked to Amit Shah, BJP within 5 days of Demonetisation^[6]
-- Rs 745.59 crore of the invalid notes deposited within 5 days in ADCB Whose Director Is Amit Shah^[7]

Co-operative banks were banned after 5 days of annoucement to take deposits of the demonetised currency^[7:1] :)

Nripendra Misra, Principal Secretary to the Prime Minister of India before & after Demonetisation^[8], Admits Failure in his own words
1> We did not succeed 100%
2> There was huge exchange of Black money into White

https://youtube.com/shorts/wJ26J-N44Ac?si=4V7GrUvewwj9SgFJ

¶ Flawed Idea

"Detailed analysis prove that demonetisation failed, not because it was badly planned, but because it was a flawed idea"
-- Harvard Business Review by Bhaskar Chakravorti^[9]

How corrupt people park ill-gotten money^[10]

• Only a tiny proportion of undeclared wealth is held in cash
• In an analysis of income-tax probes, Highest Cash component of illegal money was found to be only about 6%
• The remaining was invested in business, stocks, real estate, jewelry, or “benami” assets, which are even bought in someone else’s name

¶ Results: All goals Failed miserably

¶ 1. Returned money

Expected to eradicate atleast ₹3–4 lakh crore of black money

August 2018: Only ₹10,720 crore did not flow back into bank accounts, which is a mere 0.70% of the cash demonetized^[1:1]

Cost of printing New notes ran into 1000s of crores itself^[11]

¶ 2. Cash in circulation

Cash in circulation in the Indian economy has doubled, increasing from ₹17 lakh crores in Nov'16 to ₹33 lakh crores in Oct'23^[2:1]

¶ 3. GDP growth slowdown^[3:1]

Quarterly GDP growth fell for five successive quarters from 9.67% p.a in July-Sept 2016 to 5.32% in July-Sept 2017

¶ 4. Impact on jobs & MSMEs^[4:1]

15 crore daily wage earners lost their livelihood for several weeks

• Demonetization cost atleast 1.5m jobs
• Over 100 lives were lost
• Thousands of MSME units were shut down

References:

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1. https://economictimes.indiatimes.com/news/economy/finance/after-almost-two-years-of-counting-rbi-says-99-3-of-demonetised-notes-returned/articleshow/65589904.cms ↩︎ ↩︎

2. https://www.businesstoday.in/latest/economy/story/7-years-after-demonetisation-cash-circulation-in-economy-nearly-doubles-to-33-lakh-crore-survey-404967-2023-11-07 ↩︎ ↩︎

3. https://statisticstimes.com/economy/country/india-quarterly-gdp-growth.php ↩︎ ↩︎

4. https://www.theguardian.com/world/2018/aug/30/india-demonetisation-drive-fails-uncover-black-money ↩︎ ↩︎

5. https://www.catchnews.com/india-news/bjp-bought-land-worth-crores-just-before-note-ban-1480019920.html ↩︎

6. https://www.indiatoday.in/india/story/rs-3-118-crore-deposited-in-11-gujarat-banks-linked-to-amit-shah-bjp-after-demo-congress-1266960-2018-06-22 ↩︎

7. https://thelogicalindian.com/news/amit-shah-bank-rs-745-crore/ ↩︎ ↩︎

8. https://en.m.wikipedia.org/wiki/Nripendra_Misra ↩︎

9. https://hbr.org/2017/11/one-year-after-india-killed-off-cash-heres-what-other-countries-should-learn-from-it ↩︎

10. https://www.brookings.edu/articles/early-lessons-from-indias-demonetization-experiment/ ↩︎

11. https://economictimes.indiatimes.com/news/economy/finance/banknotes-printing-cost-rose-to-nearly-rs-8000-crore-in-demonetisation-year-govt/articleshow/67148332.cms ↩︎