The Reserve Bank of India (RBI)’s Annual Report, released on Wednesday, provides, in some sense, the final word on the government’s demonetisation exercise, which began on November 8, 2016. Multiple reasons were given for the decision to withdraw 86 per cent of India’s currency stock overnight — including the destruction of stocks of black money hoarded in cash, the possibility of windfall gains, the digitalisation of India’s payments architecture, and the moving of savings to financial assets. The RBI now says that 99.3 per cent of demonetised currency notes were exchanged at banks in the months following the announcement by Prime Minister Narendra Modi. The RBI is to be complimented for being extra careful in its release of the final numbers, however embarrassing they may turn out to be politically for the current administration. Finance Minister Arun Jaitley made a valid point on Thursday that demonetisation led to formalisation of economy and more tax collections. But from a broad policy perspective, it is now abundantly clear that the aims of demonetisation do not seem to have been met.
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