Demonetisation Was “Immensely Beneficial To Economy & People”: Govt On RBI Report

Following the release of RBI’s report on demonetisation, the government rushed to claim that the move was beneficial to the economy and people and said that the move’s fallout was predicted by the administration.

In a press release, the government said, “The two big measures of demonetization and introduction of GST were humongous measures which had changed structural and ethical foundations of Indian economy. Government has been able to manage the transition extremely, effectively and with the least pain. With demonetisation’s short term effects having played out completely, it is the long term positive impacts which will be still working its way to contribute beneficially to India’s economy and well-being of its people.”

The Reserve Bank of India’s (RBI) annual report revealed, among other things, that almost all of the demonetised currency has found its way back to the central bank. The report also concludes that only 0.0007% of Rs 1,000 notes and 0.002% of old Rs 500 notes were found to be fake. (Overview of the RBI’s report can be read here.)

The day after the much-awaited report was released, Finance Minister Arun Jaitley said that the fact that money got deposited in banks does not mean that all of it is legitimate money.

He said the deposits of “overwhelmingly large amount” of money in banks had ended anonymity around it and helped fix liabilities.

The fallout of the demonetisation of old Rs 500 and Rs 1000 notes, the minister insisted, was on predicted lines, as “more and more people will now be compelled to come into the tax net.” He said the gains would accrue in medium to long term from integration of formal and informal economy.

“It’s nobody’s case that the black money has totally been eliminated. There are still people who will be doing such transactions. But, I think, a large amount of that has come in,” he was quoted by Firstpost as saying.

Speaking at the Economist India Summit, Jaitley said, “It was clear that overwhelmingly large amount of money had come back into the banking system, something which was not of great consequences to us in the government.”

The Finance Minister said it is quite obvious that people found the ways and “I think it did shake the system.” But “the fact that money has got into the banking system doesn’t mean that they are legitimate money. Or the monies have got legitimately converted,” he said.