Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), today said demonetisation should be seen as part of government’s drive against black money and not in isolation. Speaking at an event to launch of book ‘Black Money and Tax Havens’ by Prof R Vaidyanathan, Debroy said the government had earlier come out with black money declaration scheme, which yielded only Rs 6,500 crore. Referring to cash economy, he said around 2000-01, India’s Cash to GDP ratio was 9-10 per cent, which recently shot up to 13 per cent. “There was excessive use of cash that is why cash to GDP ratio went up,” he said.
The government’s decision to demonetise old high value currency notes on November 8, 2016 should not be viewed in isolation, it was a part of broader set of measures, Debory said. “Almost entire amount of demonetised currency come back into the banking system because people realised that threat is credible. War against black money was necessary,” he added. As per the Reserve Bank, as much as 99 per cent of the junked Rs 500 and Rs 1,000 notes returned to the banking system.
RBI’s Annual Report for 2016-17 revealed that Rs 15.28 lakh crore of the junked currency had come back into the banking system, leaving only Rs 16,050 crore out.