The Prime Minster Narendra Modi-led Government has claimed to have made detailed planning and preparations for demonetization in the economy and has taken into consideration all possible measures to diminish the negative effects of demonetization. But according to Manmohan Singh, a Member of the Parliamentary Standing Committee on Finance, the RBI was given only one day to take a decision on the scheme of demonetization by the Government. As a result, less time for planning is being sensed as the reason behind the increasing number of notifications and circulars issued by RBI since 8th November, 2016 to address the issue of cash crunch arising out of demonetization and to ensure disclosure of undisclosed income by the black money hoarders. The RBI and the Ministry of Finance together have put out 60 notifications and orders or more in about 45 days of demonetization.
In the present situation on one hand, people are trying to deal with the issue of cash crunch and on the other hand, the RBI and the Ministry of Finance have been issuing new/amended notifications, clarification, circulars, norms etc every other day. RBI’s frequent clarifications and notifications; and its inability to supply sufficient cash to public have been raising doubts in the minds of people that if the Government had anticipated these consequences of demonetization and had made proper planning to handle them then what could have been the reason behind RBI’s frequent modifications to these rules and conditions. Many experts are of the view that this has tarnished the image and affected the credibility of a key democratic institution that has remained autonomous.
Although the ban seems successful so far in bringing at least a few black money hoarders to the forefront and also sucking out Rs 15.44 lakh crore (approximately) worth of high value currency notes (500 and 1000 rupees) in circulation but the problem of cash shortage in the economy still persists. With regard to the detection of black money, over Rs. 3,185 crores of undisclosed income has been admitted/detected (as reported on 21st December, 2016) while Rs. 86 crores worth new notes, and cash and jewellery worth over Rs 428 crores have been seized by the Income Tax Department (as reported on 19th December 2016). With regard to cash shortage, according to a report by an RTI-activist Anil Ganguly on 20th November, 2016, the RBI says it had Rs 4.94 lakh crore worth of new 2000 rupee notes as on 8th November, 2016 but according to the RBI Deputy Governor R. Gandhi on 13th December, 2016 only Rs 4.61 lakh crore of 2000 rupee notes have been issued to public over their counters and through their ATMs between 10th November, 2016 and 10th December, 2016.
Therefore, as the demonetization scheme is seen to have resolving the black money problem in Indian economy; the cash crunch problem arising out of demonetization should also be resolved at the earliest by RBI so that it would be easier for the public to adapt to this situation.
The Indian Lawyer