The politically crucial debate over demonetization was resurrected on Wednesday after the annual report of the Reserve Bank of India (RBI) said most of the currency, 99.3%, was deposited in the banks.
The findings of the RBI report is expected to vindicate opposition parties, who have accused the Narendra Modi-led National Democratic Alliance (NDA) government of failure of policy.
“RBI Report again proves that Demonetization was ‘Modi Made Disaster’ of Epic Proportions! 99.30% of Demonetised Money Returns! PM Modi, in his 2017 Independence Day speech made tall claims of Rs 3 Lakh Cr coming back to the system! Modiji, will you apologise for that Lie now?” Randeep Surjewala, chief spokesperson of the Congress party wrote on Twitter.
The Congress was quick to politically seize the moment. Demonetization was a “monumental folly” that affected the informal sectors and daily wage labourers, senior spokesperson and former Union minister Manish Tewari said at a press conference.
Other opposition parties such as the Left and the Aam Aadmi Party (AAP) also attacked the government. Sitaram Yechury, general secretary of the Communist Party of India (Marxist), questioned the claims of the government over eradication of black money, while Delhi chief minister and AAP national convener Arvind Kejriwal demanded that the Union government come out with a white paper.
Senior leaders of the ruling Bharatiya Janata Party (BJP), however, defended the government’s November 2016 move to demonetize ₹500 and ₹1,000 banknotes. Cash deposits made in bank accounts do not mean that the policy move failed to curb black money in the country, BJP members said.
“The entire argument of the opposition parties that demonetization did not work against corrupt is flawed. The money was deposited in the banks, which also means that people have paid taxes on the money that was earlier not disclosed by them,” said a senior BJP leader on the condition of anonymity.
“Demonetization as a move actually forced people to declare or deposit their illegal money in the banks and people were forced to pay tax on the money that was earlier not part of the financial system. It is a fact that money that was earlier out of the banking system is now part of the financial system and it is no longer possible for people to hide the illegal money,” the BJP leader said.
The money has been deposited in the bank accounts of people, but the income tax department and other investigative organizations have asked people for an explanation wherever discrepancies have been found, BJP leaders argued. “Action against the corrupt was an election promise of the BJP-NDA and demonetization was part of a series of steps taken by the Union government,” said the BJP leader quoted above.
“A parallel economy was running in the form of black money and our country under the prime ministership of Narendra Modi started the war against the black money. Everyone in the country knew that black money was being used to run a parallel economy. Black money came back in the financial system and an address was attached to the people who were holding black money and not disclosing it. There were at least 18 lakh bank accounts that came under scrutiny because of these deposits and more than 3 lakh shell companies were closed,” said Sambit Patra, BJP’s national spokesperson at a press conference on Wednesday.
The political flashpoint comes in the backdrop of the opposition and the ruling party clashing over a parliamentary panel, chaired by senior Congress leader Veerappa Moily, over the adoption of its report on demonetization.
The RBI report could be problematic for the BJP-led NDA as opposition parties could try to make it an issue in the upcoming assembly elections in Madhya Pradesh, Rajasthan and Chhattisgarh. However, the decision on demonetization had politically benefitted the BJP as the party managed to win a historic verdict in Uttar Pradesh, which turned out to be the best ever performance by the party in the state.