The very fact that nearly 100 per cent of the demonetised Rs 500 and Rs 1000 notes found their way back to the banks, some of them in ingenious deposits, proved the RBI’s contention that black money in India is held in real estate, gold or foreign currencies.

Setting aside the political chatter of its second anniversary, a dispassionate look at the facts proves that demonetisation was an economic misadventure the country could have done without. It was an overzealous measure born out of hubris and went against the cautious advice of the Reserve Bank which struck down at least two of the intended objectives as unjustifiable — black money and fake notes. The very fact that nearly 100 per cent of the demonetised Rs 500 and Rs 1000 notes found their way back to the banks, some of them in ingenious deposits, proved the RBI’s contention that black money in India is held in real estate, gold or foreign currencies. The justification about flushing out fake notes that are thought to support terrorism also proved to be too fanciful. Many ills of the current state of the economy, being buffeted now by the strong crosswinds of oil prices and declining rupee value, can also be adduced to hangovers of the note ban.  

Having had 86 per cent of the currency in circulation sucked out in a unilateral move executed very poorly in a state of unpreparedness with regard to printing replacement notes, the nation is still paying the price for it. This is evident not so much by a festering bank NPA problem that was a disaster waiting to happen as in the manner the government is pressing the RBI to unfasten at least a third of its considerable reserves to ease a liquidity crisis. The biggest drawback has been the slow recovery from demonetisation of the informal and MSME sectors, dependent on NBFC financing more than banks. And that is reflected in very poor employment generation, with one estimate showing 18 lakh new jobs surfaced when eight crore jobs were promised to sustain a burgeoning young workforce.