In shocking and rather embarrassing revelation for the Narendra Modi led- BJP government, a response to an RTI query has disclosed that Prime Minister Narendra Modi announced demonetisation on November 8, 2016 without waiting for an approval from the Reserve Bank of India (RBI). In it’s meeting, the RBI had said that black money is hoarded in the form of gold and real estate, not cash.
While it was reported earlier that the PM went ahead despite RBI’s rejection of the claim that that demonetisation would curb black money, the minutes of the meeting of the RBI Central Board on November 8, 2016 reveal that the RBI sent the approval report as a resolution to the government on December 16th, thirty-eight days after the Prime Minister made the announcement on national TV.
RTI activist Venkatesh Nayak posted the minutes of the meeting on the website of Commonwealth Human Rights Initiative.
“Most of the black money is held not in the form of cash but in the form of real sector assets such as gold or real estate and that this move would not have a material impact on those assets,” the board observed in its 561st meeting held in Delhi.
As per the minutes, the Ministry of Finance drew a draft of demonetisation that said growth of bank notes of Rs 500 and Rs 1,000 denomination was 76.38% and 108.98% during the period 2011-16, whereas the economy had grown only by 30%. Pointing to the massive error in the draft, the RBI directors disagreed saying, “the growth rate of economy mentioned is the real rate while the growth in currency in circulation is nominal. Adjusted for inflation, the difference may not be so stark. Hence, this argument does not adequately support the recommendation (in favour of demonetisation)”.
Only Rs 10,720 crore of the junked currency notes did not return to the banking system, rest 99.9 per cent was deposited raising question mark over the government’s effort of curbing black money through the demonetisation.
Also Read: Demonetisation: An Economic Atrocity We Must Never Forgive, Never Forget
The prime minister had announced demonetisation of high-value currency notes with the aim to curb the black money, check counterfeit currency and stop terror finance among others.
While any incidence of counterfeiting is a concern, the minutes said, Rs 400 crore as a percentage of the total quantum of currency in circulation in the country is not very significant.
The minutes just mention that the measure is “commendable” without any details on the positive impacts of the move. It added, “but it will have short term negative effect on the GDP of the current year.”
(With PTI inputs)