On November 8, 2016, the Modi government demonetised the Rs 1000 and Rs 500 notes in an effort to curb black money and rolled out the Rs 2000 notes. Over the next three years, the Rs 2000 notes ironically became the prime denomination to hoard unaccounted cash, according to the latest Income Tax data.
Almost half of the unaccounted cash seized this fiscal year was in this denomination, down from over 60 per cent during the last two fiscal years.
In a written reply in the Rajya Sabha, Finance Minister Nirmala Sitharaman said that an analysis of the cash seizures has revealed that over Rs 5 crore cash was seized. Of the total cash confiscated, about 67.91 per cent, 65.93 per cent and 43.22 per cent were Rs 2,000 notes in the financial years 2017-18, 2018-19 and 2019-till date respectively, Business Line reported.
However, the government said a declining trend can be seen in the seizure of unaccounted cash in Rs 2,000 notes.
Economists believe the roots of the current slowdown besetting India were sown by the midnight announcement to demonetise some 86 per cent of India’s currency by value three years ago this day, though they also blame introduction of a flawed GST, the twin balance sheet crisis facing banks, the collapse of major NBFCs as well as an overall global slowdown for the current economic impasse.
Prof. Govinda Rao, the former member of the Prime Minister’s Economic Advisory Council, said, “There were a number of factors besides demonetisation which hit the informal sector very hard… these included the introduction of a new GST system of taxes with a lot of hiccups, a slowdown of the MSME sector, higher transaction costs etc., but demonetisation was the starting point.”
Meanwhile, on the eve of the third anniversary of demonetisation, former Economic Affairs Secretary SC Garg demanded demonetising Rs 2000 notes too.
The suggestion made by the officer, who was close to Modi at one time but opted for VRS after being unceremoniously transferred out of the finance ministry, is remarkable as one of the goals of demonetisation was to check hoarding of currency.
The former secretary, who was an executive director with the World Bank at that time, wrote that "a good chunk" of Rs. 2000 notes, which account for approximately a third of India’s currency notes by
value, “are actually not in circulation, having been hoarded.” Garg advocated that these should be “demonetized, without causing any disruption” by “depositing them in bank accounts.”