A year after demonetisation, a story of re-monetisation and where did the black money go

Sharat Verma

The Hush Post, Ludhiana: Ludhiana is the biggest business hub north of Delhi. Cash in circulation means all is well, for the industry, industry owners, industrial labour, etc. During the period of demonetisation, when smaller cities and towns like Patiala, Bhatinda, Shimla were the first to see the situation ease out, in Ludhiana things went from bad to worse. Ludhiana pretty much tells the story of where and how black money went?What happened then, outside and inside the banks. The blue-collar Ludhianvis waited in queues to deposit someone else’s money in their account, and return the favours later. The white-collar Ludhianvis, industrialists mostly, were inside the banks. Most of these people in suit and tie transacted, carried with them, discreetly, small and medium sized packets and came out after ‘transaction’ with the same packets, full and bloated. The transaction time for such people was after 5:00pm. The ATM machines were empty but these transactions kept taking place smoothly. Which means the cash was there, but it wasn’t for those outside the ATMs. Its effect can be seen one year down the line. The black money has not been really curbed. With queues upon queues of people trying to deposit the banned 1,000 rupee notes and 500 rupee notes, in January 2017, the total cash in circulation was just Rs 8.98 lakh crore. In October 2017, it was Rs 16.1 lakh crore as per the RBI. Almost from where it began!

Harish Dua, the owner of KG Exports, says, “What demonetisation should have done, it hasn’t been able to achieve. It has created problems for those living on the margins. “I had to reduce my workforce from 550 to 450 because export became difficult and we are an export house.”

Ajit Lakra, a Ludhiana-based businessman doesn’t entirely agree. He says, the only problem with demonetisation is that they should have aligned it with income declaration then rather than chase them now. “After all huge amount of money has already been converted into white money. Though, government has indicated that they will chase all those people who made huge staggered deposits in banks.”

However, one year after demonetisation, let us have a quick look at what note ban did to the economy. The government said that it will increase electronic payment transaction. The value of total electronic payment transaction in November 2016 was Rs 94 lakh crore. This went up in March 2017 to Rs 149 lakh crore. In August 2017, it came down to Rs 109 lakh crore and in October it is at Rs 99 lakh crore, just Rs five lakh crore more than last November when demonetisation began. Though, many in the government say that it has widened the new tax payers’ circle. In 2014-15, the total number of tax payers increased by Rs 76 lakh. This went up by 63.5 lakh tax payers in 2015-16 and in 2016-17 the tax payer’s number went up by 80 to 91 lakh, according to the finance ministry. The increase in the number is true, but the increase is not unusual compared to previous years. Jatinder Khurana, an Income Tax lawyer says, e-returns have definitely gone up but it is a big question whether we can attribute it to only demonetisation.

For previous years — taking the entire financial year — tax returns had even grown at an equal or higher pace, rising from 31 per cent in 2012-13, to 38 per cent in 2013-14. The growth fell to 15 per cent in 2014-15, before rising to 27 per cent in 2015-16, and settling at 22 per cent in 2016-17.