Fifty Days Of Demonetisation

What a long, strange trip it’s been. And what a lot of new currency has been seized in these 50 days.

ByMeghnad S
Fifty Days Of Demonetisation
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On November 8, 2016, a mortal man appeared on television and announced that the money in everyone’s possession cannot be used to buy stuff from midnight. Everyone believed him and everyone lost their minds. Imagine how things would have been if people just collectively decided to ignore this man on TV and go about their business as usual?

Fifty days of the promised ‘end of cash crunch’ have come to a dramatic conclusion. You might have a different opinion about demonetisation based on what you see, read, experience and where you live, but everyone must have felt the pinch of notebandi one way or the other. At the beginning of this ordeal, I had written a piece about how this whole move will benefit banks on holy-mother-of-god levels. Reports are now saying that almost all the demonetised currency is likely to have returned to the banks, putting the government in a foot-in-the-mouth situation.

Even if we overlook the fact that the government wildly miscalculated the black money component in the demonetized cash, there is also a strange string of events where incomprehensible amounts of new currency was found in the possession of individuals across the country. This is despite the withdrawal limits set by the government on November 10. There was an avalanche of media reports about cash being recovered, but nobody was asking *how* these people got their hands on such large amounts.

A bunch of us curious, enthu-cutlet people, made a crowd-sourced database to keep a track of these new currency raids. Here’s what we found.

Please keep in mind that this is in no way a scientific measure of the total amount of new currency seized. We have tried to maintain this database based on news reports, so there is a possibility of error. The main objective of doing this was to get an estimate of exactly how widespread this phenomenon of seized new currency was and to see if we could observe any patterns. Also, since this is a live database, the amounts are subject to change.

Seize The Cash

Since the announcement of November 8 and the circulation of new currency two days later, there have been more than 120 raids (and our spreadsheet only has the ones that have been reported in the media. It’s very possible that there are many, many more). Based on these recorded instances, a total amount of Rs 262 crore was seized.

This money belongs to 109,526 people who could have withdrawn within permitted limits. It also equals 10.5 lakh ATM transactions.

The money seized did not include the commission that must have been charged to exchange old money into new. So we did an estimate and assumed average 25 per cent commission (we reached that percentage on the basis of a Twitter poll). If we add that 25 per cent, the total amount comes to Rs 350.48 crore.

If one person uses a 24×7 ATM to withdraw the seized currency amount at one transaction per minute, it would take that person 728 days to get this much money. That’s just about 2 years!

Which raises one big, fat question: how did these people get hold of the cash in the first place?

Show Me The Money

There were three major authorities that conducted these raids: the Income Tax department, the Central Bureau of Investigation and the State Police. Apart from these three, isolated raids were also done by Customs Department, Enforcement Directorate, the Indian Army, Election Commission and a few others. Here’s a breakup of these raids:

After sorting, we found that the Income tax department conducted most of the high value raids although the number of cases were small. The breakup of amounts comes to:

Income Tax Rs 203.82 crore

State Police Rs 28.82 crore

CBI Rs 13.41 crore

Others Rs 15.55 crore

There was a report in Quint earlier that said that the IT department was acting on the information provided by the Prime Minister’s Office. If that is to be believed, it would make sense that the IT Dept was doing high value raids. Since Police is a state subject, it is more likely that they were acting on tip-offs from common citizens acting as whistleblowers.

The State of Things

There are 21 states feature in the glorious list of seizures at the moment.

Karnataka tops the list, followed by Gujarat and Maharashtra. One curious point to note here is that the first case from Maharashtra was reported on December 9, which is a whole month after demonetisation. Punjab reported its first case on December 14, while Uttar Pradesh on December 16. It’s worth noting that both these states are headed towards election in the coming months. Strangely enough, Bihar still doesn’t feature in the list. One very interesting case was reported recently from Nagaland where a businessman from Haryana used chartered planes to transport Rs 23 crore new currency.

Qutub Minar vs Seized Cash

This is not necessarily of any consequence, but a stack of the seized currency will be as tall as a 41-floor building. That’s almost two Qutub Minars!

That’s not all. We also made estimated measures of the weight of seized notes and their height if they were are stacked on top of each other.

The distance covered by the trail of these notes will (almost) cover a distance from Delhi to Agra.

So much feels after 50 days

Let’s say it out loud right away: Demonetisation sounded like a good idea because for as long as we can remember, India’s politicians have been corrupt and filling their pockets at the cost of the nation’s infrastructure and development. More often than not, they’ve got away with it. Even when they haven’t got away with it, when they’ve been found guilty, they’ve lost none of their gloss and shine (case in point: Suresh Kalmadi). So when the Prime Minister sold demonetisation as a crackdown on black money, practically everyone bought it. It was called a “bold” idea, with “bold” standing in for “no idea what it really means or does but hey! SOUNDS COOL!” Over the next few weeks, we were told that actually demonetisation was to crackdown on terror funding, that it would flush out counterfeit currency (while bringing back Rs 100 notes that had previously been considered obsolete because they’re damaged), that it had been done because the PM had decided it was time to go cashless… short of world peace, demonetisation would achieve everything.

Fifty days later, it’s clear that not only was demonetising 85 per cent of the currency in a predominantly cash economy a bad idea, it was followed by horrible implementation. The loss of daily liquidity has struck both the disorganised sector hard. Industries like tourism and agriculture have been facing serious challenges. Small businesses have been struck hardest and business that are labour-intensive, like weaving, have struggled through these 50 days.

The damage that demonetisation has caused to the economy in this quarter is immense and it is likely to take a few more months to see a recovery. More than 100 people have died standing in queues.

As we look forward to undemonetised days – imagine! Being able to withdraw as much as of your own money as you want, whenever you want! Be still my beating heart! – there are a few obvious points that we shouldn’t forget.

1) The RBI is supposed to be an independent body. However, with demonetisation, we’ve been provided with ample instances that suggest it is are acting on behalf of the PMO. There have been 62 notifications in the past 50 days, some of them contradictory and all of them betraying a certain cluelessness and obedience that is an unpleasant cocktail of between ridiculous and worrying.

2) A few RBI officers were also arrested for being a part of this insane currency exchange racket, which suggests corruption within those ranks. Our bankers, on whose shoulders this whole move was dependent on, were placed in an unenviable situation because they had no time to prepare for demonetisation. While the banking sector has had to bear the brunt in terms of labour hours, they’ve also failed us. The money laundering that has happened in these 50 days has largely been made possible by banking officials. Axis Bank has made headlines for this, but they’re not alone.

3) There is no law against keeping your money in cash. There is no law that can let the Government put a withdrawal limit on its citizens. And there is *definitely* no law that allows them to put a deposit limit. Such policies are neither legal nor do they inspire confidence in our present government. They should actually scare us because every one of these random decisions, taken based on some whim, affects the civil liberties and rights of 1.2 billion people.

4) The Parliament was completely and utterly ignored amidst all of this. A handful of opposition MPs and some in the treasury benches were successful in stalling both houses for 21 days. No discussion happened on demonetisation and as a result, important questions remain unanswered. For instance, how much currency has been printed? How much old currency has come in? When will the withdrawal limits be removed? Why am I being forced to go cashless?

6) The government not only ignored the Parliament, it cleared a bizarre ordinance that makes it illegal to possess old notes. The new law proposes a penalty of Rs 50,000 or more for possessing old notes above the value of Rs 10,000. This law could have been brought when the Parliament was in session barely two weeks ago, but no, it was passed right after the end of the winter session. The government’s intention seems to be to push any law they want through without facing any questions. The promise made by the RBI to “pay the bearer an amount…” will be extinguished after March 31.

Prime Minister Modi, with his sidekick of RBI, stomped on some fundamental civil liberties when he announced the rules of the demonetisation game. And not only have we played by his rules, we’ve even given him the popular vote, if media reports are to be believed. We barely questioned why we were not being allowed to access our own hard-earned money. We didn’t question the different explanations we were given for this move. There’s been no opportunity to ask why possessing old currency – which officially is worthless now – should be illegal.

And let’s not forget, India is a democracy.

Then again, the Prime Minister is due to address the nation tomorrow.

The author can be contacted on Twitter @Memeghnad


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