RTI reveals Narendra Modi announced demonetization before RBI’s formal approval 

A man showing demonetized ₹500 and ₹1000 notes.

New Delhi: Prime Minister Narendra Modi announced the demonetization of ₹500 and ₹1000 notes, which saw 86 per cent of high value currency going out of circulation, even before formal approval by the RBI central board. A query under the Right to Information Act revealed this.

It found that although the Reserve Bank of India board, chaired by the-then governor of the central bank, Urjit Patel, had met a few hours before Modi announced the demonetization of the banknotes, at 8pm on November 8, the minutes of the meeting were signed five weeks later, on December 15, 2016.

The query also found that while RBI directors described the move as “commendable”, they also warned that the demonetization of the two high-value banknotes “will have a short-term negative effect on the GDP for the current year.”

The central bank’s board had also observed that demonetization “would not have any material impact on tackling the black-money menace or counterfeit currency”, pointing at the top objectives of the move, as cited by Modi.

RTI activist Venkatesh Nayak, in the minutes posted on the website of Commonwealth Human Rights Initiative – a non-government organizaton, said, “It is a commendable measure but will have short-term negative effect on GDP for the current year. Most of the black money is held not in the form of cash but in the form of assets such as gold or real estate and that this move would not have a material impact on those assets.”

On the other hand, the RBI revealed it had no data on the old ₹500 and ₹1000 notes used to pay for utility bills such as fuel at petrol pumps, the payments considered anonymous and are believed to have formed a good part of the demonetized currency that returned to the banking system.

It has now emerged that the demonetization of the two currency notes had an adverse effect on the Indian economy and put breaks on growth. With almost all old ₹500 and ₹1000 notes coming back to the RBI, the impact on black money was also proven to be negligible if not non-existent.

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