Congress latches onto RBI minutes wherein it concluded that demonetisation will have no material impact on black money
New Delhi: A day after general elections were announced, the minutes of a crucial RBI meeting on demonetisation have been revealed in an RTI reply by none other than the central bank. The RBI board, according to minutes of the meeting, had met just two-and-a-half hours before Prime Minister Narendra Modi, in an address to the nation, announced the demonetisation decision.
The RBI board, which included the present Governor Shaktikanta Das as a director, had warned of short-term negative impact of demonetisation on the GDP; it had also observed that the unprecedented move will not have any material impact on tackling the black money menace.
Curbing black money was one of the prime objectives of the shock move to junk old Rs 500 and 1,000 notes, which saw 86 per cent of high value currency going out of circulation. The RBI board, however, approved the demonetisation on being assured that the government will take mitigating measures to contain the use of cash, the RTI reply states.
On Monday, the Congress latched onto the minutes of the meeting. Party leader Jairam Ramesh released the RTI reply to show that the meeting had clearly recorded that “most of the black money is held not in the form of cash but real estate and gold and this move (demonetisation) would not have any material impact on these assets.”
Ramesh further pointed out that the RBI board had objected to all the reasons assigned by the finance ministry and Prime Minister Modi for demonetisation. He said the truth about the note ban has ultimately come out in the RTI reply of the RBI.
The government, for instance, had argued that the circulation of Rs. 500 notes was up by 76 per cent and Rs.1000 up by 109 per cent. The RBI, however, said that argument did not adequately support the cash ban recommendation. The central bank directors also felt that while counterfeit notes were a concern, “Rs. 400 crore as a percentage of the total quantum of currency in circulation in the country is not very significant”.
According to the RTI reply, the RBI board also rejected the finance ministry’s rationale for the unprecedented step of withdrawing high-value currency notes — that there was a “steep rise in circulation of these notes in the last five years.” The minutes note: “The growth rate of economy mentioned is the real rate while the growth in currency in circulation is nominal.
Adjusted for inflation, the difference may not be so stark. Hence, the argument does not adequately support the recommendation (of the finance ministry).” Jairam said demonetisation was indeed a “Tughalaqi Farmaan” without planning or discussion and even today, the nation is facing its consequences.
“There will be an investigation into all abnormal increases in the fund flows from tax havens. Demonetisation was a giant money laundering exercise and even today we are facing its consequences,” he said. The Congress has pledged to hold an investigation into the demonetisation scam that ruined lakhs of people, if it returns to power.
