Former RBI governor Raghuram Rajan has made some stunning revelations about demonetisation in his book ‘I Do What I Do: On Reforms Rhetoric and Resolve’ which is due to release next week. In this book, Rajan has revealed that he wasn’t in support of the demonetisation as he believed that short term cost of the decision will far outweigh any long term benefits. According to a report by TOI, Rajan said that he had warned the government about the short-term costs of demonetisation which might outweigh the long-term benefits.
The former Reserve Bank of India governor added that he had suggested alternatives to achieve the goal of stamping out black money. “The RBI flagged what would happen if preparation was inadequate,” wrote Rajan, who returned to University of Chicago Booth School of Business as faculty after his term as governor ended.
The Narendra Modi government had demonetised old Rs 500 and Rs 1000 currency notes on November 8 last year. The decision was taken in order to curb the use of black money in India but the untimely execution led to a lot of chaos and trouble. The RBI had replaced the old Rs 500 notes with the new ones while Rs 1000 notes were completely taken out of the system. Instead, new Rs 2000 notes were introduced. The Opposition parties have time and again attacked BJP and PM Modi on this issue.
Last week, the Reserve Bank of India had released data related to demonetisation in its annual report. It was revealed that out of 632.6 crore pieces of Rs 1,000 currency notes in circulation, 8.9 crores have not been returned post the note ban last November. This means that only 1.4% of the old Rs 1000 notes have not come back.
The RBI said that old notes worth Rs 15.44 lakh crore were there in the market, out of which 15.28 lakh crore have been received by the bank. The report further mentioned that 7.62 lakh pieces of counterfeit currency notes were detected in FY’17 as against 6.32 lakh in FY’16. However, what came as a major setback for the government is that the cost of printing notes doubled to Rs 7,965 cr in FY’17 from Rs 3,421 cr in FY’16 on account of new currency printing post note ban.