Bengaluru, Nov 8: The Congress is protesting on the second anniversary of demonetisation on Thursday. The grand old party has kept the controversial issue alive to reach out people ahead of 2019 General Elections. As an opposition party, Congress' criticism is expected, even distinguished economists did not endorse the decision of demonetization.
In a continued attack against the Modi government, Congress tweeted, "The cost and 'Destruction By Demonetisation' was endured by every citizen of this country other than few crony capitalist friends of PM Modi. Demonetisation was a black day for our democracy & our economy." As per data provided by the Congress, Rs 8000 crore spent on printing new notes, 3.5 million jobs were lost, 15 million labour force shrank and 1.5 per cent loss in GDP.
When Prime Minister Narendra Modi announced demonetisation on November 8, 2016, to get rid of "black money", the entire nation welcomed the move. The other reasons were to the purge the network of counterfeit notes and break up the terror finance network. The objectives of the government were laudable, but the people and the economic system paid price for it.
Indeed, rendering 86% of the country's currency invalid overnight delivered a big blow to the economy heavily dependent on cash.
Bhaskar Chakravorti, Dean of Global Business at The Fletcher School at Tufts University, wrote, "Indeed, India subsequently suffered a dramatic drop in its GDP growth rate, which fell to 6.1% annualized during January-March 2017 after three quarters with the annualized growth rate staying in the range of 7.9% to 7%. It most recent GDP growth figure has fallen to 5.7%, and part of that, too, can be attributed to the policy move from last  November."
Nevertheless, BP government is pushing its own argument. Finance Minister Arun Jaitley talks about the achievements of the note ban.
- When cash is deposited in the Banks, the anonymity about the owner of the cash disappears. The deposited cash is now identified with its owner giving rise to an inquiry, whether the amount deposited is in consonance with the depositor's income. Accordingly, post demonetisation about 1.8 million depositors have been identified for this enquiry. Many of them are being fastened with Tax and Penalties. Mere deposit of cash in a bank does not lead to a presumption that it is Tax paid Money
- In March 2014, the number of Income Tax returns filed was 3.8 crores. In 2017-18, this figure has grown to 6.86 crores. In the last two years, when the impact of demonetisation and other steps is analysed, the Income Tax returns have increased by 19% and 25%. This is a phenomenal increase
- The number of new returns filed post demonetisation increased in the past two years by 85.51 lakhs and 1.07 crore and for 2018-19, advance tax in the first quarter has increased for personal income tax assesses by 44.1 percent and in the corporate tax category by 17.4 percent.
- The Income Tax collections have increased from the 2013-14 figure of Rs 6.38 lakh crore to the 2017-18 figure of Rs 10.02 lakh crore.
- The growth of income tax collections in the pre-demonetisation two years was 6.6 percent and 9 percent. Post-demonetisation, the collections increased by 15 percent and 18 percent in the next two years. The same trend is visible in the third year.
Talking about expert views, RBI's former governor Raghuram Rajan said the note ban was 'not a good idea'. Raghuram Rajan said, "The positive impacts (of demonetisation) are out there in the future. We have no idea whether they will be important. To my mind, it was not a policy that was useful at that time."
Also, Gita Gopinath, Indian origin Chief Economist of IMF, did not approve of PM Modi's surprise move of note ban. In an exclusive interview to Business Standard, she said that not a single macroeconomist thinks demonetisation was a good idea. Comparing the cash circulation in India with Japan she said, "Japan has the highest cash per capita, way more than India. The cash in circulation, relative to the gross domestic product (GDP) for India was 10 per cent, whereas in Japan it is 60 per cent. That is not black money; that is not corruption."
Still, BJP is a favourite:
Ultimately, like in any other democratic system, election results are evidence of the success or failure of the policy decisions in India. But the BJP juggernaut is unstoppable except in by-elections, even after opposition parties high-voltage campaign against demonetization and especially, against Narendra Modi. After 2016, the BJP has won Gujarat, Uttar Pradesh, Uttarakhand, Himachal Pradesh assembly elections. In Karnataka, though the saffron party emerged as the single largest party, but failed to form the government. Moreover, BJP created history in Tripura by dethroning CPM.
If we consider the number of states won by the BJP, it clearly shows that the note ban was not at all an issue for the voters as Congress and intellectuals think of. However, one cannot rule expert comments on the controversial issue which is difficult to comprehend by common people. The loss of Rs.3 lakh crores that cannot be recovered ever is no small issue to be ignored by experts not easy to be understood by the common people.
'Demonetisation' experiment proves that BJP enjoys the 'benefit of the doubt' among voters despite its flaws highlighted by the opposition of experts. No doubt, PM Modi-led BJP will successfully continue to ride on the 'doubts' created by the 'Demonetization' in the upcoming Lok Sabha elections.