India’s overnight demonetisation of the Rs 500 and Rs 1000 last November continues to face strong criticism in the country. Many politicians and central bank officials have notably expressed their concerns on many fronts, including fears of social exclusion of the most vulnerable echelons of society and the unbanked. To add fuel to the flames, the recent figures released by the Reserve Bank of India (RBI) will certainly not contribute to ease these tensions.
The government justified its move by stating that the removal of the country’s two highest denominations would be an effective measure against corruption and criminality. Yet, a very different picture has come up with the RBI’s latest figures. Indeed, 99% of the recalled notes were accepted at bank branches, meaning that of the 15.44 trillion notes in circulation, only 1% were held illegally – far from what the government was expecting to prove in terms of black money.
Unsurprisingly, this angered the demonetisation’s many opponents, which denounce a “monumental management failure and legalised plunder of the economy”, in the words of Manmohan Singh – former prime minister and governor of the RBI. Critics also lament the disastrous management of the removal of the demonetised notes, which resulted in the death of many citizens queuing for days at banks to exchange their notes within the tight timeframe. And although the central bank simultaneously issued a new highest denomination – the Rs 2,000 – meant to renew the currency in circulation rapidly, the majority of ATMs were not equipped to dispense these new notes, leading to a complete demonetisation chaos.
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