Where were you when Prime Minister Narendra Modi on November 8 last year abolished Rs 500 and Rs 1000 notes? Had you heard of ‘demonetisation’ before his speech? How many hours did you spend standing in ATM and bank queues?
To remind you of those demonetisation days, here is a recap of the terms that gained currency in the wake of the note ban.
A for ATMs: The machine before which Indians lined up and prayed for cash. ATMs had to be recalibrated to handle new Rs 500 and Rs 2,000 notes, but that took time. The country has about 2.2 lakh ATMs and a quarter of these were running dry till February. But there was jugaad at the ATM too: you could hire an errand boy to queue up for you.Read more ↓
B for black money: Prime Minister Modi mentioned ‘black money’ 17 times in his 40-minute demonetisation speechon November 8 and called it a “festering” sore. The Reserve Bank of India (RBI) told a parliamentary panel that it had “no information” on how much black money was extinguished as a result of demonetisation. In August, it reportedthat 99% of the demonetised Rs 500 and Rs 1,000 notes returned to the banking system. The BJP insists demonetisation worked and is celebrating November 8 as ‘anti-black money day’.
COMPLETE COVERAGE: One year of demonetisation
C for cashless villages: Badjhiri in Madhya Pradesh, Lanura in Jammu & Kashmir and Ibrahimpur in Telangana were among villages declared “cashless” in their financial transactions. Except they weren’t cashless: Poor training, people not having smart phones or bad connectivity were among reasons the villages returned to their old ways. Shops in Ibrahimpur, south India’s first cashless village, have returned to cash because banks charge Rs 1,400 monthly for using swipe machines.
D for digital transactions: An analysis of Modi’s speeches found that between November 8 and November 27, the stated objective for demonetisation swung from eliminating black money to making the economy digital or cashless. Digital transactions gained momentum after demonetisation, as the government actively promotes cashless transactions to reach its target of 25 billion digital transactions in 2017-18, according to RBI data.
E for elections: If the Uttar Pradesh elections were a referendum on demonetisation, then voters seem to have given Modi a seal of approval. The BJP’s electoral victory three months after demonetisation gave him political capital and the chance to launch sensitive reforms like the Goods and Services Tax.
F for fake currency: Demonetisation also aimed to scuttle counterfeiters, but recovery and seizure of fake Indian currency notes in 2017 have dropped from the levels recorded in 2016 and 2015. The face value of counterfeit Indian currency seized across India between November 2016 and November 6, 2017, totalled Rs 16 crore, less than one-third of the Rs 51.3 crore seized in 2016. In 2015, this figure was Rs 44.2 crore, says this report. But a point to note is that none of the fake currency notes caught post-demonetisation were of high quality.
G for GDP: The Indian economy slowed to a three-year low of 5.7% in the April-June quarter this year, signalling that businesses were still hurting from demonetisation. Finance minister Arun Jaitley conceded that deceleration was “a matter of concern” but said the slowdown was also due to global factors. Government data showed gross domestic product grew 7.1% in the full financial year 2016-17, slower than 7.9% recorded the previous year.
H for history of demonetisation: Modi’s demonetisation has been called historic, but it wasn’t unprecedented. According to RBI, Rs 1,000 and Rs 10,000 notes were scrapped in 1946. In January 1978, Morarji Desai had banned all currency denominations above Rs 100: Rs 1,000, Rs 5,000 and Rs 10,000. For both prime ministers, it was the menace of black money that had compelled the government to scrap currency. The difference: 39 years ago, it was rare for the common man to possess high-value notes.
I for income tax: IT returns filed in the current fiscal year saw an increase of 25%, according to the Central Board of Direct Taxes. Substantial rise was also seen in direct tax collections during the same time period, with advance tax collections of personal income tax growing by 41%. The growth in tax collection was attributed to demonetisation and Operation Clean Money launched earlier this year.
J for jokes: Cash was in short supply, but jokes were not. Modi, Mahatma Gandhi and Bollywood stars become the butt of jokes. Sonam Gupta started as a pre-demonetisation trend on Rs 10 notes but peaked during demonetisation. Images of demonetised Rs 500 and Rs 1000 notes with ‘Sonam Gupta Bewafa Hai’ started trending on social media. Who is Sonam Gupta though? Was she really faithless to someone? That’s a mystery but a real Sonal Gupta wasn’t amused at her husband’s jokes.
K for Keynes: “Those who say that demonetisation will be in the interests of the country in the long run should be reminded of what John Keynes once said, ‘In the long run all of us are dead.’” That was former prime minister Manmohan Singh quoting John Maynard Keynes, the British economist who believed that governments should play a major role in economic management. Singh’s speech in Parliament brought him back into the limelight as an influential critic of the government’s policies.
L for layoffs: Demonetisation was followed by layoffs across industries and the crisis in some cases was attributed directly to the November 8 decision. The Centre for Monitoring Indian Economy estimatedthat demonetisation was linked to 1.5 million job losses from January to April 2017. Startups struggled with hirings, reported Forbes, and the big guns of IT industry, including Infosys, Wipro and Cognizant, laid off employees.
M for mitron: Modi began his November 8 speech with ‘my dear citizens’. He didn’t say ‘mitron’ (friends), but still that word spawned countless social media memes in the days after demonetisation. A Delhi pub offered 200% discount on drinks every time Modi said “mitron” in his New Year’s eve speech. The pub saved money: Modi didn’t say mitron in his December 31 speech to the nation.
N for new notes: In a bid to remonetise, new Rs 2000 and Rs 500 currency notes were introduced. The bright magenta Rs 2000 note was panned for its design, while a rumour spread that it came with an embedded chip. Reports of fake Rs 2000 notes circulating or ATMs dispensing ‘Children Bank of India’ notes raised concerns over whether demonetisation could effectively tackle counterfeit currency.
O for opposition: Opposition parties severely criticised the government for demonetisation. Rahul Gandhi called the decision a “Modi-made disaster”, Arvind Kejriwal dubbed it the “the biggest scam” in independent India and Mamata Banerjee called it “biggest disaster”. Former prime minister Manmohan Singh, known for his reticence, broke his silence to say that “monumental mismanagement” around demonetisation would cause a GDP decline of 2%.
P for PAN: Tighter surveillance and a crackdown on black money led to a three-fold increase in PAN (permanent account number) registrations, an 18% rise in income tax returns as well as a significant increase in the number of properties seized by the tax department to 475.
Q for queues: Years down the line, demonetisation will be remembered for the serpentine queues in front of banks and ATMs. A viral image taken by HT photojournalist Parveen Kumar of a 78-year old retired soldier crying after he missed his spot in the queue became emblematic of the hardships faced by people. People took time off work to stand in lines, while reports of people collapsing while waiting in queues came in from different parts of the country.
R for Raghuram Rajan: Former RBI governor Raghuram Rajan indicated in September–a year after exiting office–that he did not favour demonetisation as he felt the short-term economic costs would outweigh any longer-term benefits from it. He rejected speculation that preparations for the move got underway many months before Prime Minister Modi made the surprise announcement. Rajan described the decelerationin GDP as “the cost of demonetisation upfront.”
S for Supreme Court: While the issue of demonetisation played out in political corridors, it was also being discussed in the Supreme Court. “You cannot be allowed to deprive a person of his money”, the court told the government in July 2017 while hearing petitions against demonetisation. On November 3, the court said all individual cases against demonetisation would be heard by a constitution bench that is to be set up for reviewing the validity and other aspects of demonetisation.
T for tax net: Finance minister Arun Jaitley defended demonetisationin August, saying it was not only to curb black money but also to confiscate illicit cash and bring people holding it into formal channels and tax them. “The real object of demonetisation was formalisation, attack on black money, less cash currency, bigger tax base, digitisation, a blow to terrorism,” Jaitley said.
U for Urjit Patel: RBI governor Urjit Patel appeared before a parliamentary panel to answer questions on demonetisation and cashless transactions. Many Opposition leaders questioned the RBI’s autonomy and wondered if the decision to withdraw the old Rs 500 and Rs 1,000 notes was independently taken by the central bank. Patel maintains that in the long term, demonetisation will benefit the country.
V for ‘v-shaped’ recovery: Urjit Patel said in February this year that India’s economy would make a “sharp V” recovery after demonetisation. “Almost everyone agrees that the impact is going to be a sharp ‘V’, that we would have a downgrade of growth for a short period of time,” he said in a TV interview. “However, the remonetisation has happened at a fast pace and that was part of the plan.”
W for weddings: A couple in Surat spent just Rs 500 on their wedding. The couple’s families decided not to have a grand wedding and served the guests ‘chai and paani’. Many people complained that because of the cash ban it was tough for them to plan weddings. About two weeks after demonetisation, the RBI said people could withdraw Rs 2.5 lakh for weddings.
X for Xerox: Three months after demonetisation, Uttar Pradesh Police received complaints over photocopies of the new Rs 2,000 note. “The (fake) note looked like a Xerox copy of the original note,” the complainants said. The National Investigation Agency also recovered fake Rs 2000 notes. The agency said three fake notes they recovered were of “high quality”, but most others were just “scanned copies”.
Y for Yo-Yo: As the government tried to deal with the impact of demonetisation, it frequently changed rules on depositing old notes and withdrawing money. By November 17, rules for cash exchange had changed four times, withdrawal limits had changed thrice, and rules for the usage of old notes had changed thrice. By December 8, rules for cash exchange had changed 6 times, withdrawal limits had changed 5 times, and rules for the usage of old notes had changed 7 times. Track how the rules changed with this interactive.
Z for zero balance accounts: Deposits in Jan Dhan, or zero balance, accounts surged immediately after demonetisation. There was talk that people laundered their wealth using these accounts. The trend reversed within five weeks and total deposits started coming down, notes this report.
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