Ex-Bureaucrat’s “Mixed” Review Of Notes Ban

On a day the Supreme Court upheld Prime Minister Narendra Modi’s 2016 demonetisation, with a dissenting judgment from one judge, a former bureaucrat shared a mixed review of the move.

Rajiv Kumar, the former vice-chairman of government’s thinktank,Niti Aayog, told NDTV on Monday that he didn’t think the notes ban had managed to achieve all it set out to do. One positive, he said, was digitisation.

The Supreme Court, backing the notes ban in a 4-1 verdict, said it is “not relevant” whether the objective of the overnight ban was achieved or not.

The outcome of demonetisation was “quite mixed”, Mr Kumar told NDTV in an exclusive interview.

“Six years later, I am not so sure of it. I was convinced that it was worth it when it was undertaken, but the way things have turned out…well let me say that the fillip that it has given to digitisation and to the growth of the fintech industry and to the fact that we have gotten a lot more financial inclusion in the economy etc. I won’t maybe repeat it, but the purpose it was done with has been largely achieved,” he said, on being asked whether it was worth it.

While announcing the notes ban in November 2016, PM Modi had made it clear that the ban was part of a larger plan to curb black money, and thereby terrorism.

But six years on, the amount of fake currency in circulation is far more than 2016.

Mr Kumar said: “Given the nature of our economy, the unorganised sector in our economy, a large segment of our economy is running on cash, the large sectors like construction etc. the attempt to weed out the cash economy or the black money etc, I don’t think it would have been achieved.”

The value of the total currency in March last year went up 89% to Rs 31,05,721 crore, compared with Rs 16,41, 571 crore as of March 2016, the Finance Ministry told parliament recently.

According to data shared by the ministry in Lok Sabha, the volume of currency in terms of the number of notes in circulation to has jumped 44 per cent to touch 1,30,533 million in March 2022.

The value of digital payments, meanwhile, has shot up from Rs 6,952 crore in 2016 to Rs 12 lakh crore in October 2022.

The majority judgment from the top court maintained that the government has the power to demonetise bank notes of all series and proper procedure was followed while banning notes of Rs 500 and Rs 1000 denomination in 2016. The court said decision passes the test of proportionality – meaning it is a reasonable way to root out black money and fake currency. The 52-day time given for exchange of notes was not unreasonable, the judges said.

In a strong dissenting judgment, Justice BV Nagarathna said the notes ban was “vitiated and unlawful”.