Too early to call demonetisation a failure, say experts on RBI report

With almost all denotified notes returned to RBI, can we call demonetisation a success?

With almost all denotified notes returned to RBI, can we call government's demonetisation scheme a success? Most of the experts lauded government's landmark policy as soon as the RBI revealed that 15.28 lakh crore, or 99 per cent of the Rs 15.44-lakh-crore scrapped currency notes, had come back to the central bank.

Siddhartha Sanyal, chief India economist at Barclays, said, "Of course, immediate gains look miniscule and the disruption in terms of GDP is significant, but thankfully there has been a normalisation. We have seen improvement in tax compliance, both in direct and indirect taxes. It is wrong to nitpick the data based on just one or two quarters. We need to take into account long-term effects too. Overall, demonetisation has been positive for organised sectors."  

Rama Subramaniam Gandhi, retired Deputy Governor, RBI, also praised the government's policy. "With almost 99% banned notes returned, it means it has turned from black to white. Now, we know who should be held responsible for that money. Now, people will be bound to pay taxes. I would not agree that just because surplus didn't happen, it is not a success. Money has returned to system. It is now accounted and people have moved to electronic side, which a good." 

However, Aditi Nayar, Principal Economist at ICRA, said that the the amount that has come back into system is a fraction of what was needed. "In real terms it may not be a small number, but certainly it is nominal, less than expected. The return is less than what was expected in the monetary terms. The cost of printing is one of the main reasons why the surplus from RBI to govt has halved this year."

Former CEA Arvind Vimani said that the figures are in line with the numbers black money experts gave earlier.