One Year Later, There Can Be No Monetary Value Attached to the Destructive Costs of Demonetisation

'While the negative impact of demonetisation can still be felt, the gains have been minor and could have been achieved even without the disruptive move... Hundreds of millions of Indians went through toil and trouble for months after the announcement of demonetisation on November 8, 2016. It has got etched in their memory since they lost jobs, their businesses declined and incomes plummeted.

It was known theoretically that a sudden demonetisation would not solve the problem of black money but would damage the white economy severely. This is what has transpired in practice. The rate of growth of the white economy plunged due to the impact of a cash shortage in the unorganised sectors. The organised sectors also suffered, but less so because they can and do transact via cheques and electronically. They also recovered faster since the cash shortage declined more rapidly in the cities than in rural and semi-rural areas.

Rs 3-4 lakh crore out of the Rs 15.44 lakh crore demonetised were expected to not come back to the banks. However, according to the Reserve Bank of India (RBI), 99% of the old notes have come back so that only Rs 15,000 crore of the old notes remain with the public. Most of this is also expected to return or be accounted for. The worry is that since counterfeit currency may also have returned and got counted, the RBI may find that more than Rs 15.44 lakh crore has been collected by the banks – an embarrassment...'