While the Reserve Bank of India (RBI) is still reconciling the quantum of demonetised currency that has been returned to banks by the December 30, 2016 deadline, NITI Aayog Member Bibek Debroy feels about 10 per cent of such notes won’t return to the system.
“Even now, Rs 1.6 lakh crore is what will be missing at the end of it all. Those are the figures. If I take a base of roughly rounding off demonetised currency around Rs 16 lakh crore, 10 per cent of it is about Rs 1.6 lakh crore,” Debroy told IANS in an interview.
“Figures say that still Rs 1.5 lakh crore that has not come back. There is still a gap. People have made estimates that may be 10 per cent will not come back,” he added.
Some reports have said about 97 per cent of the demonetised currency notes worth Rs 14.97 lakh crore have been deposited back as on December 30. The government had earlier estimated that about Rs 15.4 lakh crore of Rs 500 and Rs 1,000 notes — or 86 per cent of cash in circulation — will be taken out of the system.
Meanwhile, the central bank has cast doubts on its own estimates. “The periodical SBN (specified bank notes) figures released by us were based on aggregation of accounting entries done at the large number of currency chests all over the country,” it said. The last figure released by the RBI was that deposits of Rs 12.44 lakh crore have been received till December 10, 2016.
“Now that the scheme has come to an end these figures would need to be reconciled with physical cash balances to eliminate accounting errors/possible double counts. Till this is completed, any estimate may not indicate the actual numbers of the SBNs that have been returned,” RBI had said.
Debroy said the bulk of the old currency coming in is a positive indication.
“I can look at it as a positive thing. If it doesn’t come back, then that currency is destroyed. It reduces RBI’s liability to that extent. For the amount that comes into the system, people will have to pay taxes, penalties, that is the money that actually comes to the government,” he said.
The scrutiny of the money deposited in banks, however will take time, he added.
Debroy also said demonetisation has checked the disproportionate cash in the Indian society, and that the cash-GDP ratio in India is way higher than its other Asian counterparts.
“Around 2000, the cash-GDP ratio in India used to be around 9 per cent while today it has gone up to 13 per cent. Obviously the use of cash is disproportionately high to what is required for transaction purposes,” he said.
As per official data, Sri Lanka, for example, has cash-GDP ratio of just 3.5 per cent, Bangladesh has 5 per cent, while Pakistan has 9 per cent.
Quite clearly, there is excess cash in India that needs to be reduced, Debroy said.
He said about 97 per cent of households in India have bank accounts, though it is a separate matter that for various reasons they have not been encouraged.
(Meghna Mittal can be reached at firstname.lastname@example.org)