Skip to main content

Neither Modi, nor Jaitley, nor those in PMO or Finance Ministry had any idea about the immediate after-effects of demonetisation

By Venkateshwar Rao jr
Prime Minister Narendra Modi and Finance Minister Arun Jaitley can continue to indulge in the rhetoric of demonetisation, but the Reserve Bank of India’s Annual Report for 2016-17 tells an absorbing story of economic disaster management. Modi’s November 8, 2016 televised announcement of withdrawing Rs 1000 and Rs 500 notes from circulation was nothing but an act of bravado, meant to take the bulls of black money, counterfeit currency and terror funding by the horns as it were, but basically an empty attention-grabbing gesture.
Neither Modi nor his government had any clear idea about the extent of counterfeit currency, black money and terror funding in the money circulating in the system. It is quite unlikely that the government would put the information in public domain for sanctimonious reasons of state even if it had specific information at the time.
But the information about currency in circulation and the money available in the banks is known through the Reserve Bank of India’s weekly statistical supplements. On March 31, 2016, the currency with the public was Rs 15,972.5 billion, and on November 11, 2016 it was Rs 15,262.3 billion. It was at a high of Rs 17,013.8 billion on October 28, 2016. It came down to Rs 9,119.1 billion on November 25.
And the bank’s annual report for 2016-17 says that currency in circulation declined by Rs 8,997 billion on January 6, 2017, “which resulted in a large increase in surplus liquidity with the banking system, equivalent to a cut in the CRR by about 9 per cent.” (CRR or cash reserve ratio is the mandatory cash that the banks have to maintain apart from their daily turnover.)
The bank used “unconventional measures” like market stabilisation scheme (MSS) by issuing securities of short-term duration. Apparently, the bank had asked the government to increase the limit on issuance of securities from Rs 300 billion to Rs 6,000 billion. Cash management bills (CMBs) under MSS were used between December 2, 2016 and January 13, 2017. And the bank managed to deal with excess liquidity in the system. “With fast paced remonetisation surplus liquidity in the system declined by mid-January 2017,” the bank’s annual report notes.
It looks like that neither Modi nor Jaitley nor those in the Prime Minister’s Office (PMO) or those in the Ministry of Finance seem to have had any idea about the immediate after-effects of demonetisation. The RBI identifies five phases in the post-demonetisation period to deal with the flood of liquidity in the banking system unleashed by demonetisation. In the first phase, from November 10, 2016 to November 25, 2016, the RBI used various measures of reverse repo. That is, the central bank borrowed money from the banks which were now flush with cash at variable and fixed rates.
According to the bank, it absorbed Rs 5,242 billion on November 25, the peak. In the second phase, from November 26 to December 9, the bank absorbed up to Rs 4,000 billion through Incremental Cash Reserve Ratio (ICRR) of 100 per cent, which meant that banks’ CRR rose from existing 4 per cent to 8 per cent and more. In the third phase, from December 10, 2016 to January 13, 2017, the bank it used Cash Management Bills (CMBs) under the Market Stabilisation Scheme (MSS), and it took in Rs 7,956 billion on January 4, 2017.
In the fourth phase, from January 14, 2017 to end-March,2017, the bank fell back on the traditional reverse repo to drain the excess liquidity from the banks. This measure peaked on March 6, 2017 with the bank absorbing Rs 5,522 billion, and it declined to Rs 3,141 billion by the end of March. But the bank report says that surplus liquidity persisted through March as a result of which the government maintained cash balances and the banks kept excess CRR.
In the fifth phase, beginning with the new financial year in April 2017, the bank anticipated that surplus liquidity will persist through 2017-18, the bank provided for MSS and reverse repo measures of up to Rs 1 trillion and it had auctioned Treasury Bills for Rs 1 trillion in April and May, 2017.
There is an interesting twist to the story of demonetisation. While post-demonetisation witnessed unprecedented excess in liquidity, the period from April,2016 to November 8, 2016, the RBI injected Rs 2.1 trillion to move from liquidity deficit of Rs 813 billion in Quarter 1 from April, 2016 to June, 2016 to a liquidity surplus of Rs 292 billion in Q2 (July, 2016 to September,2016) and to a surplus of Rs 64 billion in Q3 (October,2016 to November 8,2016).
The tacit assumption behind the demonetisation argument was that there was excess liquidity in the system, which the subversive elements were manipulating, and therefore there is a need to drain that excess. It turns out that the assumption was wrong. There was no excess liquidity in the system. And the RBI’s statistics reveal the exact volumes of liquidity in the system. While Prime Minister Modi revelled in demonetisation, the RBI had to step in and carry out remonetisation operations and that too in double quick time.
And the bank assures, “The continuing increase in currency in circulation on the back of remonetisation is likely to reduce the magnitude of the liquidity overhang during the course of the year.” The disruption, and let us be clear that there was nothing clear about it, that Modi has caused through demonetisation had to be repaired by the RBI through the remonetisation measures. The argument for a less-cash economy is so much of baloney. It is possible to split hairs about cash and liquidity, and how they are not the same, and how draining out cash from the system is not the same as creating a liquidity crunch.
The RBI report makes it clear that there is not much of a theoretical difference between the two, and less cash translates into less liquidity. The banks cannot handle too much liquidity or cash, and people cannot do with less cash. And there is a moral in all this: Fools venture where angels fear to tread!
---
Source: http://parsareport.blogspot.in/2017/09/modi-demonetised-rbi-remonetised.html

Comments

SAMIR SARDANA said…
The Entire DEMO EXERCISE is a GIGANTIC FRAUD AND A DISASTER OF THE BRAIN OF NARENDRA MODI

1.Even the RBI initally accepted the disaster – but later went along like all lackeys and Indian weasels.as under: The minutes of the RBI Board Meeting which took place just a few hours BEFORE the execution of the DEMO DRIVE stated as under:

• “It (demonetisation) is a commendable measure but will have short-term negative effect on GDP for the current year,” read the minutes of the RBI board meeting.
• “Most of the black money is held not in the form of cash but in the form of real sector assets such as gold or real estate and that this move would not have a material impact on those assets,” the board observed in its 561st meeting held in Delhi.dindooohindoo

2.THERE HAS BEEN NO IMPACT OF DEMO ON SO CALLED TERROR IN INDIA AS THE NUMBER OF THESE ATTACKS AND THE CASUALTIES OF INDIAN SOLDIERS AND CIVILIANS HAS INCREASED AFTER THE DEMO DRIVE

3.THERE HAS BEEN NO IMPACT OF DEMO ON SO CALLED DRUG TRADE IN INDIA AS THE NUMBER OF THESE SEIZURES AND THE HAS INCREASED AFTER THE DEMO DRIVE

4.AS PER THE RBI REPORTS THE COUNTERFEIT CURRENCIES OF RS 50 AND RS 100 NOTES HAS INCREASED BY 50% AS THE COUNTERFEITERS HAVE FOCUSSED THEIR TECHNOLOGY ON THESE NOTES.THAT IT BECAUSE THE COUNTERFEITERS ARE TAKING TIME TO PERFECT THE COUNTERFEITING OF THE RS 500 AND RS 2000 NOTES AND ITS SUPPLY CHAIN OF PRINTING, DISTRIBUTION, STOCKING AND DISSEMINATION

5.THE GOI/RBI STATISTICS ON COUNTERFEIT RS 500 AND RS 2000 ARE MISLEADING.THESE NOTES ARE NOT COMING INTO THE BANKING SYSTEM AT THE SAME FREQUENCY AS IN 2017.IF THE NOTES DO NOT COME INTO THE BANKS THE FAKES ARE NOT DETECTED.THEREFORE THE RBI STATISTIC IS FALSE AND MISLEADING

6.AS PER RBI REPORTS,THE FLOWS OF RS 2000 NOTES INTO THE BANKS HAS REDUCED OVER THE YEARS AND BANKS ARE DOLING OUT LESS AND LESS RS 2000 NOTES.THAT MEANS THE RS 2000 NOTES ARE BEING WAREHOUSED BY THE MARKET – FOR MONEY LAUNDERING AND BLACK MARKETING.THAT DEFEATS THE PURPOSE OF DEMO AND MAKES THE CASE FOR DEMO – PART 2 FOR THE RS 2000 NOTES

7.THE ABOVE PROVES THAT THE ENTIRE DEMO DRIVE WAS BOGUS AND NOT BECAUSE ALL THE CASH CAME BACK INTO THE SYSTEM.IT IS BECAUSE ALL THE AIMS FAILED (AS ABOVE)

8.AS PER THE RBI REPORT,RS 11000 CRORES OF CASH DID NOT COME INTO THE BANKING SYSTEM. HOWEVER , THAT IS ALSO A MISLEADING STATISTIC AS

• THE RBI HAS SPENT RS 10000 CRORES IN THE LAST 3 YEARS TO PRINT THE NEW NOTES
• COULD RS 11000 CRORES WHICH IS 0.6% OF THE CASH THAT CAME INTO THE BANKS,REPRESENT THE SOILED,DAMAGED NOTES OR FORGOTTEN CASH OR CASH OUTSIDE INDIAN WHICH COULD NOT RETURN TO INDIA DUE TO THE FEAR OF QUESTIONING AND PROSECUTION – BUT IS LEGIT MONEY ? THAT WOULD BE A CASE OF THE INDIAN STATE CHEATING ITS CITIZENS
o THIS RS 11OOO CRORES IS NOT COUNTERFEIT AS IT IS ASSUMED THAT THESE ARE SERIALLY NUMBERED NOTES
• HAS RBI ACCOUNTED FOR EACH LEGIT CODE NUMBERED CURRENCY NOTE WHILE CALCULATING THE RS 11 CRORES AMOUNT OR IS IT BASED ON A DEDUCTIVE FIGURE ? DEDUCTIVE FIGURES ARE BASED ON ASSUMPTIONS OF COUNTERFEITS AND DAMAGED NOTES.

SAMIR SARDANA said…
9.THE RBI REPORT DOES NOT STATE THE VALIUE OF THE COUNTERFEIT CURRENCY EXCHANGED FOR GOOD NOTES IN THE DEMO DRIVE.THAT IS A PURE LOSS OF THE DEMO DRIVE AND WAS A FOOL PROOF MODE OF CONVERTING CURRENCY AT POST OFFICES,COOPERATIVES AND BANKS IN TIER 2 AND 3 CITIES

10.IT MUST BE NOTED THAT IF COUNTERFEIT CURRENCY IS SENT INTO INDIA BY A STATE ACTOR,THEN IT IS ONLY REASONABLE TO ASSUME THAT THE SAME HAS ALREADY BEGUN AND IS MORE PROFITABLE THAN BEFORE.

• THE RBI HAS NOT RELEASED THE STATISTICS FOR THE NEW NOTES BEING COUNTERFEITED.
• EVEN IF THE CASES ARE LESS IT WOULD BE SUBJECT TO PARA 10.5 ABOVE.
• ALSO,A COUNTERFEIT IS COUNTED BY THE RBI ONLY IF IT IS DETECTED.GOOD COUNTERFEITS ARE NOT DETECTED.
• AS A MATTER OF RECORD,PAKISTAN’S MINT PRINTS CURRENCIES FOR SEVERAL NATIONS INCLUDING GCC NATIONS,WITH FAR MORE STRINGENT QUALITY NORMS AND SEVERE SAFETY AND RISK FEATURES THAN THE INDIAN RUPEE.

11.IT IS A MATTER OF RECORD THAT THE SMEs HAVE BEEN DESTROYED BY DEMO AND GST AND THEIR OUTPUT HAS BEEN TAKEN OVER BY LARGE CORPORATES – AND THAT IS WHY THE GST AND POWER DEMAND IS HIGHER THAN BEFORE.BUT 100s OF MILLIONS OF LABOUR ARE UNEMPLOYED AND SMEs ARE DESTROYED FOREVER.dindooohindoo

12.IN LIGHT OF ALL OF THE ABOVE,WHAT IS THE BENEFIT OF THE DEMO DRIVE ? WAS THERE A SINGLE BENEFIT TO THE NATION ? THAT IS WHY THE INFORMATION SOUGHT BY THE APPELLANT IS IN PUBLIC AND NATIONAL INTEREST

13.BESIDES THE ABOVE ,THE DEMO FRAUD AND THE DEMO C OUNTERFEIT FRAUD ( WHEREIN THE COUNTERFEITS ARE EXCHANGED FOR REAL CURRENCY) – IS NOT STATED IN THE RBI REPORT

• THERE IS NO REPORT IN THE MEDIA, OF ANY RECOVERY MADE FROM THE CONVERTERS BY THE DRI/ED

14.HAS THE RBI DATA ON DEMO BEEN AUDITED BY A 3 RD PARTY ? HAS THE RS 15 LAC CRORES OF NOTES BEEN CHECKED FOR EACH CODE NUMBER AND WATERMARK AND COUNTERFEIT ?

• IF NOT,THEN THE NOTES MAY INCLUDE COUNTERFEITS.
o IF YES,THEN THE ESTIMATED COUNTERFEIT AS SAY 3% OF THE AGGREGATE CASH IN INDIA – WOULD BE A BENEFIT – WHICH THE RBI HAS NOT HIGHLIGHTED IN THE REPORT.DOES THAT MEAN THAT THE COUNTERFEITS ARE IN THE NOTES SUBMITTED AND EACH NOTE HAS NOT BEEN VERIFIED.
• EVEN IF THE COUNTERFEITS WERE CHECKED AND FOUND OUT AFTER THE EXCHANGE AND AFTER MANY MONTHS, THE DATA OF THE SAME AND THE ACTION ON THE DEPOSITORS (SINCE CCTVs CAPTURE THE DEPOSITOR),IS IN PUBLIC INTEREST

TRENDING

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

How lead petitioner was rendered homeless when GM mustard matter came up in SC

By Rosamma Thomas*  On January 5, 2023, the Supreme Court stayed a December 20, 2022 direction of the Uttarakhand High Court to the Indian Railways and the district administration of Haldwani to use paramilitary forces to evict thousands of poor families occupying land that belonged to the railways.  Justice AS Oka remarked that it was not right to order the bringing in of paramilitary forces. The SC held that even those who had no rights, but were living there for years, needed to be rehabilitated. On December 21, 2022, just as she was getting ready to celebrate Christmas, researcher Aruna Rodrigues was abruptly evicted from her home in Mhow Cantonment, Madhya Pradesh – no eviction notice was served, and nearly 30 Indian Army soldiers bearing arms were part of the eviction process. What is noteworthy in this case is that the records establishing possession of the house date back to 1892 – the title deed with the name of Dr VP Cardoza, Rodrigues’ great grandfather, is dated November 14

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam* RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Tax buoyancy claims when less than 4% Indian dollar millionaires pay income tax

By Prasanna Mohanty  In FY18, the last year for which disaggregated income tax data is available, only 29,002 ITRs declared income above Rs 5 crore, while Credit Suisse said India had 7.25 lakh dollar millionaires (the wealth equivalent of Rs 8 crore and above) that year. Often enough, the Centre claims that demonetization in 2016 raised tax collections, improved tax efficiency, and expanded the tax base. Now RBI Monetary Policy Committee (MPC) member Ashima Goyal has also joined their ranks, attributing the “claims” of rising tax collections in the current fiscal year to “tax buoyancy” brought by the demonetisation . Do such claims have any basis in official records? The answer is unequivocal. The budget documents show the tax-to-GDP ratio (direct plus indirect tax) increased from 10.6% in FY16 (pre-demonetization) to 11.2% in FY17, remained there in FY18 (demonetization and GST fiscals), and then fell to 9.9% in FY20. In FY22, it improved to 10.8% and is estimated to drop to 10.7% in

Cyrus Mistry, PM Modi’s brother: What do these accidents have in common? Merc!

By Rosamma Thomas*  In September 2022, in an accident at Palghar near Mumbai, Cyrus Mistry, former chairman of the Tata Group, died in a road accident . On December 28, 2022, a road accident in Mysore left one of Prime Minister Narendra Modi’s brothers injured. What is common in these accidents? The car that crashed into the divider on the road, in both these cases, was manufactured by “prestigious” German manufacturer Mercedes Benz. One former dealer of Mercedes Benz cars in India has been raising issues of the threat to the lives of those riding these cars for many years now. Cama Motors, among the oldest dealers of foreign cars, having started business in pre-independence India, noted over 10 years ago that Mercedes Benz was indulging in corrupt practices . The cars are currently priced between Rs 41 lakh and Rs 2.92 crore in India; few people realize that the pride of owning a Merc comes at considerable risk to life. Cama Motors carefully documented several of the flaws on a websi

Gandhian unease at Mahadev Desai book launch: Sabarmati Ashram may lose free space

By Rajiv Shah  A simmering apprehension has gripped the Gandhians who continue to be trustees of the Sabarmati Ashram: the “limited freedom” to express one’s views under the Modi dispensation still available at the place which Mahatma Gandhi made his home from 1917 to 1930 may soon be taken away. Also known as Harijan Ashram, a meeting held for introducing yet-to-be-released book, “Mahadev Desai: Mahatma Gandhi's Frontline Reporter”, saw speaker and after speaker point towards “narrowing space” in Gujarat for Gandhians (as also others) to express themselves. Penned by veteran journalist Nachiketa Desai, grandson of Mahadev Desai, while the book was planned to be released on January 1 and the meeting saw several prominent personalities, including actor-director Nandita Das, her scholar-mother Varsha Das, British House of Lords member Bhikhu Parekh, among others, speak glowingly about the effort put in for bringing out the book, exchanges between speakers suggested it should be rele

Civil rights leaders allege corporate loot of resources, suppression of democratic rights

By Our Representative  Civil rights activists have alleged, quoting top intelligence officers as also multiple international forensic reports, that recent developments with regard to the Bhima Koregaon and the Citizenship Amendment Act-National Register of Citizens (CAA-NRC) cases suggest, there was "no connection between the Elgaar Parishad event and the Bhima Koregaon violence." Activists of the Campaign Against State Repression (CASR) told a media event at the HKS Surjeet Bhawan, New Delhi, that, despite this, several political prisoners continue to be behind bars on being accused under the anti-terror the draconian Unlawful Activities (Prevention) Act. Addressed by family members of the political prisoners, academics, as well as social activists, it was highlighted how cases were sought to be fabricated against progressive individuals, democratic activists and intellectuals, who spoke out against "corporate loot of Indian resources, suppression of basic democratic

Kerala natural rubber producers 'squeezed', attend to their plight: Govt of India told

By Rosamma Thomas   Babu Joseph, general secretary of the National Federation of Rubber Producers Societies (NFRPS) at a recent discussion at Mahatma Gandhi University, Kottayam, explained that it is high time the Union government paid greater heed to the troubles plaguing the rubber production sector in India – rubber is a strategic product, important for the military establishment and for industry, since natural rubber is still used in the manufacture of tyres for large vehicles and aeroplanes. Synthetic rubber is now quite widespread, but styrene, which is used in making synthetic rubber and plastics, and also butadiene, another major constituent of synthetic rubber, are both hazardous. Prolonged exposure to these even in recycled rubber can cause neurological damage. Kerala produces the bulk of India’s natural rubber. In 2019-20, Kerala’s share in the national production of rubber was over 74%. Over 20% of the gross cropped area in the state is under rubber cultivation, with total

Bangladesh 'rights violations': US softens stance, fears increased clout of China, India

By Tilottama Rani Charulata*  In December 2021, in addition to the Rapid Action Battalion (RAB), the United States imposed sanctions on seven former and current officers of the force, alleging serious human rights violations. Benazir Ahmed and former RAB-7 commander Miftah Uddin Ahmed were banned from entering the US. RAB as an institution was also canceled the support it was getting from the US and its allies. At the same time, those under the ban have been notified of confiscation of assets held abroad. The anti-crime and anti-terrorism unit of the Bangladesh Police, RAB is the elite force consisting of members of the Bangladesh Army, Bangladesh Police, Bangladesh Navy, Bangladesh Air Force, Border Guard Bangladesh, Bangladesh Civil Service and Bangladesh Ansar, and has been criticized by rights groups for its use of extrajudicial killings and is accused of forced disappearances. The government of Bangladesh has been insisting about lifting the ban on RAB, but the US had till recen