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Demonetization only a partial success in India

  • Published at 11:42 am January 19th, 2018
  • Last updated at 11:59 am January 19th, 2018
Demonetization only a partial success in India
India has not succeeded in stopping the illegal fake money trail operating from West Bengal’s Malda despite demonetization and the best security coordination with Bangladesh. However, demonetization has brought in some tangential benefits to the Indian economy. There has been a sharp drop in the quantum of fake notes circulating in the country. Delhi has succeeded in seizing illegal assets worth Rs35 billion following Prime Minister Narendra Modi's snap decision to demonetize. Still, top Indian security officials in various establishments dealing with economic crimes are frustrated. Criminals, reportedly operating in Nepal and Bangladesh, were able to make counterfeit Rs500 and Rs 2,000 denomination notes within days of their release in India -- and most fake notes still come from Malda, as before. Evidence of this was available about a year ago. According to Indian media reports, 16-year-old Parul Sheikh was arrested on January 23 last year for possessing a single fake note of Rs2,000 denomination. Then two more were arrested on February 4 and February 8. Digambar Mondol and Azizur Rahman were held with two and 40 counterfeit notes of Rs2,000 denomination respectively. Police said Azizul was acting as a courier. The common factor linking them was that they all hailed from Malda. The fake money trail was still operational. While the government supported its controversial demonetization decision claiming that it was intended to locate the black money, subsequent experience has proven otherwise. Before the government crackdown, the total amount of black money in circulation was estimated at around Rs15.44 trillion. As it turned out, there was a mad frenzy among people to open new bank accounts, encouraged by the authorities. Clearly, those with illegally hoarded cash were diverting their money to new accounts opened by their relatives or friends. All over India, billions of rupees must have changed hands, on paper. Latest Reserve Bank of India reports suggest that 98.96% of the estimated black money has been deposited in banks this way. The massive illegal hoard now became part of the open economy with only Rs160 billion still unaccounted for. The central government indicated that this in itself was an achievement, as the newly declared money was available for investments and other social uses and that most of the new account holders had become part of the official income tax network. This would result in greater official revenue mobilization. There was progress in other spheres too. Between November 8, 2016, and November 8 last year, the amount seized in counterfeit money was nearly Rs160 million, whereas the corresponding figure between November 2015 and November 2016 was over Rs510 million. “Clearly for all the criticism directed at the government, demonetization did some good too,” says an official of the Kolkata-headquartered Allahabad bank. The other improvement concerned the number of seizures of fake money. In 2007-08, fake money seizures numbered 8,528. Only a year later, it rose to 35,730 and by 2014-15, the number of cases was 353,637, indicating the increased level of activity on part of the internationally-backed counterfeit money operators. Officials feel that this figure, too, would be down considerably after the move to demonetize. They say demonetization has so far been partially successful. As for the much-discussed long-term benefits, India will have to wait for some more time.
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