Rajat Sharma

Estimates of huge amount of black money going out of circulation proved wrong

On November 8, when Prime Minister Narendra Modi announced that Rs 500 and Rs 1000 currency notes will no more be legal tender, most of the experts had estimated that a big part of Rs 14.17 lakh crore rupee in old currency notes will go out of the banking system as black money. The State Bank of India had pegged its estimate at nearly Rs 2.5 lakh crore, which would go extinguished out of the system, and this would have been a windfall for the RBI and the government. The liabilities of RBI then would have reduced. But the deputy governor of RBI on Wednesday gave figures to say that nearly Rs 12 lakh crore old currency notes have already been recovered as of December 5. There are 25 more days left, and it is now incumbent on the government to explain how it will benefit from the demonetization move. A senior Finance Ministry official explained that mere depositing of huge amount of currency notes into bank accounts does not mean that black money has been converted into white. He said, the Income Tax department would now go into all big transactions, which, in itself, will be a Herculean task. One estimate is that out of Rs 12 lakh crore deposited, nearly Rs 7 lakh crore have been deposited in accounts where more than Rs 1.5 crore in old currency notes have been deposited in one go. Transfer of huge amounts in old currency notes in bank accounts, and exchange of huge amounts of old currency notes with new ones could not have taken place without the connivance of senior bank officials. The government now needs to take action against such errant officials too.

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