Indian Prime Minister Narendra Modi’s demonetisation plan was initially planned to wipe out hoards of black money.

In his address on Nov 8, where he announced that Rs500 and Rs1,000 notes would no longer be legal tender, Modi spoke dramatically of currency notes stashed under beds and in gunny bags.

Scrapping large banknotes is seen as a realistic way of tackling the informal economy by some economists, notably Harvard professor Kenneth Rogoff.

Of course, India’s demonetisation has got the wrong end of the stick. Rather than ban large notes, the drive actually ended up adding a larger bill to the pile: the Rs2,000 note, double the value of the largest banknote till last month.

Far from helping wipe out cash hoards, this large note, if Rogoff’s theory is to be believed, will actually provide a fillip to the informal economy, of which the so-called black money is a subset.

Show me the money (in Rs2,000 notes)

Sure enough, the past few days have seen headlines about income tax and police raids across the country, with the authorities discovering large stashes of new Rs2,000 notes.

Given that the new banknote is being carefully rationed by the Union government, the raids have raised some serious questions about how these people have managed to lay their hands on so much of the new currency.

The latest raid occurred on Saturday as a law firm in Delhi was found holding around Rs25 million in new notes. Earlier on Saturday, Union government officials seized Rs240m in new Rs2,000 notes from a car in Vellore, Tamil Nadu.

On Wednesday, a Bharatiya Janata Party (BJP) leader in West Bengal was arrested in possession of Rs3.3m in the newly issued Rs2,000 notes. Earlier on December 2, another BJP leader was arrested with over 900 new Rs2,000 notes.

Line up and outrage

In a public database of new currency seized, curated by public policy professional Meghnad S, nearly Rs1.6b in new notes seems to have been recovered in raids and arrests till now.

Given that the common man is currently braving it out in ATM lines for a new note or two, with a limit on Rs2,500 per day on ATM withdrawals, and a weekly limit of Rs24,000, it is more than ironic that at the same time, large stashes of new currency notes are being recovered in raids.

This article was originally published at Scroll.in and has been reproduced here with permission.

Opinion

Politics of the budget
Updated 12 Jun 2021

Politics of the budget

Govt wants to provide its disillusioned, disappointed voters the gratification they have been denied since the PTI came to power.
Federal features
12 Jun 2021

Federal features

At the core of the concept of federalism is sharing of power...
Missing gender
12 Jun 2021

Missing gender

Censorship in science raises many questions....
Learning and follow-up
Updated 11 Jun 2021

Learning and follow-up

Creating learning and feedback loops is important to reduce accidents, but this aspect remains missing in most organisations.

Editorial

12 Jun 2021

Feel-good budget

WE have been here before. Every time a government gets some fiscal space it immediately shifts gears to growth,...
Rep Omar’s tweet
Updated 12 Jun 2021

Rep Omar’s tweet

Over the last several decades, America has been instrumental in destabilising a number of Muslim states.
12 Jun 2021

Poor health indicators

IF the coronavirus has taught the world anything, it is that the old maxim ‘health is wealth’ is true. Though...
Changing course
11 Jun 2021

Changing course

Tarin says govt, IMF want sustainable economic growth, but both disagree on the path Islamabad must take to attain the objective.
11 Jun 2021

Political bartering

IN what appears to be a continuation of the unsavoury wheeling and dealing that is characteristic of Senate...
11 Jun 2021

Baghlan massacre

FEARS that Afghanistan will plunge into a torrid whirlpool of violence once all Western troops leave in September...