The Untold Story

It remains a puzzle to this day about why demonetisation was done in the first place—although there were some astute minds even two years ago who sensed it was a method of making it easier for currency-hoarders, black-marketeers and black-money-operators to transport, store and exchange large volumes of cash more efficiently and cost-effectively.

That aspect of Narendra Modi's noteban bombshell may be one of the many mysteries of the Demonetisation operation.

None of the original officially-stated objectives of the massive currency switch have been fulfilled and this is indisputable even though Finance Minister Arun Jaitley has attempted to conjure up a few feeble figures to claim that the number of registered taxpayers has increased—without making any mention of the fact that the actual quantum of income-tax collection has not shown any magical rise, which would have happened if the shock of a demonetisation had really instilled fear in the hearts of millions of tax evaders, avoiders and defaulters.

Another oft-repeated claim by the government and by the Prime Minister himself is that noteban was aimed at transforming India into a cashless economy. RBI statistics and Jaitley's own figures reveal the absurdity of that contention—India still remains very much a cash-transaction economy and even the nominal rise in digital transactions is not striking enough to attribute to the November 2016 bombshell.

Rather, the country has been gradually going electronic for more than a decade ever since online banking and credit and debit cards were introduced and in any case number of digital transactions would have grown in the normal course. Indeed, GST being rammed down the throats of the business community, down to the smallest mom-and-pop shops, has forced more people to computerise their accounts and digitise their big payments than noteban did.

Even the increase in use of ATMs was under compulsion during the initial 50 harrowing days after November 8 when citizens were denied the right to withdraw their own money from their own savings bank accounts and had no alternative but to swallow the humiliation and endure the hardship of standing in serpentine lines for hours on end in front of cash dispensing machines to be able to get a maximum of Rs 2000.

It is noteworthy that in spite of the fact that in the subsequent months the number of banknotes that can be withdrawn in a day continues to be ridiculously rationed, cash remains king in the majority of transactions in ordinary retail trade, public transport networks and daily payments and wages.

The truth is that demonetisation was both a failure and a disaster in terms of the stated objectives. The billion-dollar question is whether it achieved certain hidden and invisible goals that were never made public. Only a deep-excavation investigation into the real motives behind why Narendra Modi announced his draconian measure at 8 pm on that fateful day (November 8) can reveal the true story.

The strangest aspect of the mysterious volumes of cash being found is that none of those stories have been followed up by the authorities or the media. None of the questions that cried out loud to be asked were ever seriously asked or investigated.

A partial and feeble explanation given at that time was that perhaps corrupt bank managers might have secretly handed over the new currency to favoured customers. But the bank branch back door theory can at best be an unconvincing part-answer—physically taking out huge quantities of banknotes from bank vaults under cover of darkness could not have been possible for individual bank managers.

Too many staff members and security guards would have been privy to the goings-on. Consignments of cash delivered to the branch and deposited in its safe lockers, would have been accounted for in the records and receipts. There would have been multiple persons involved and numerous receipts and other documents.

In other words, the back-door theory does not hold much water, except for small amounts of limited handouts.

That has not happened. It indicates that the bundles of newly minted cash were diverted to other destinations instead of being delivered to the cash-starved bank branches. This could only happen with the involvement of key persons in the State Bank treasuries and those entrusted with transporting consignments of newly printed banknotes in security vehicles. Thereby hangs a story.

The story of the real motives behind the disastrous demonetisation decision of the Modi government can become known only after a dispassionate inquiry settles a key issue—was it a mistake or a crime? Every aspect of Operation Note Ban will need to be probed in-depth before credible facts can come to light and doubts can be set at rest.

One such aspect relates to cash logistics.

It has been well-known in banking and financial circles that one of the security firms entrusted with this sensitive assignment is a rapidly growing enterprise owned by a ruling party MP. Strangely enough, the same security firm handling cash logistics has also been awarded contracts to nationally important facilities like government offices and even military establishments.


Vol. 51, No.24, Dec 16 - 22, 2018