Even as India's common man is stuck in bank lines, raids have unearthed Rs1.6bn of new currency notes
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.