All that demonetisation achieved was make millionaires leave the country?

Last Updated: Mon, Mar 26, 2018 11:52 hrs
Bank (AFP Photo)

When Narendra Modi announced his grand demonetisation move to a shocked nation on November 8, 2016, one of the arguments he made in favour of wiping out 86% of the money in circulation was that this would facilitate a push to a less-cash dependent India.

"The misuse of cash has led to artificial increase in the cost of goods and services like houses, land, higher education, health care and so on. High circulation of cash also strengthens the hawala trade which is directly connected to black money and illegal trade in weapons," the Prime Minister had said in his speech unveiling the radical move.

Finance Minister Arun Jaitley too later went on to stress how reducing the money in circulation was one of the primary aims of demonetisation.

On the first anniversary of demonetisation, Jaitley noted: "One of the important objective of demonetisation was to make India a less cash economy and thereby reduce the flow of black money in the system. The reduction in currency in circulation from the base scenario reflects that this intended objective has been met."

Just four months after those observations comes definitive proof that even the government has given up on that pipedream and is admitting India's cash dependency.

The Reserve Bank of India data on March 9, 2018 showed that the cash in circulation stood at Rs 18.13 lakh crore – higher than the Rs 17.97 lakh crore on November 8.

Noted economist Ajit Ranade quoted this data and posed these essentially demonetisation questions the government and the nation needs to reflect on:"Why was it done? What did it achieve? How come india took it in its stride? No venezuela style street protests? How come narrative survived? Did it actually hurt the poor more than the rich?"

Another economist Morgan Stanley's highly regarded Chief Global Strategist Ruchir Sharma, meanwhile, came up with a part answer - and a rather interesting one - to what demonetisation had achieved.

23000 millionaires - 6.9% of the total millionaire population - have left India post Modi coming to power, he told the Financial Express in an interview.  Of this, 7000 millionaires - 2.1% of the millionaires population in the country - left in 2017,  "the largest of any major nation", he told his interviewer.

This migration could hit Indian markets and may not be good for the long-term future of the country, he had stressed at an earlier event.

When asked why he thought this migration ("physically moved from the country and spent 6-plus months in a new country per year") was happening, Sharma told the paper, "One likely reason that Indian millionaires are leaving is due to the anti-corruption and regulatory crackdown in India, resulting in wealthy Indians wanting to move their capital elsewhere."

So, at last, we have one possible result triggered by the trouble that we as a nation took in the post-demonetisation aftermath. But would it count as a benefit?

You decide...

More from Sify: