The Narendra Modi government functionaries and its sympathisers have been taking enormous pains from the date of demonetisation of high-value notes of Rs 500 and Rs 100 to underscore the point that the fruits of demonetisation would be available in the medium to long-term. And that in the immediate term, the nation has to grin and bear the consequences of this major reform that sucked out 86 percent of the currency in circulation.
The poor did more than that. They understood with their native intelligence that what Prime Minister Narendra Modi had done was for their benefit to strike against moneybags. The poor voted his party, the Bharatiya Janata Party (BJP), back to power in state after state post-demonetisation despite standing in serpentine queues for nearly two months before automated teller machines (ATMs) and bank cash counters to withdraw cash.
While the poor understood, a section of the intelligentsia and the Opposition joined hands to heckle the government despite tangential but by no means illusory achievements in the medium-term itself---a surge in indirect taxes [read Goods and Services Tax] registration by a hefty 50 percent and near-doubling of income tax returns in the aftermath of demonetisation and GST. That the GST collections have surpassed the Rs 1,00,000 crore mark several times which is more than what all indirect taxes put together fetched in the pre-GST era was lost on them.
The Modi government functionaries and its sympathisers have been crying hoarse that mainstreaming of the economy would be the main achievement of demonetisation after the dust settles down. Now there is a healthy and new-found respect for digital transactions, away from cash transactions that were de rigueur even for high-value property acquisitions.
The critics brushed aside the claims of mainstreaming of the economy on the ground that it was first and foremost superficial and pyrrhic. They wanted a here-and-now proof. And that they said was not available for according to them the return of 99.3 percent of the demonetised notes into the banking system spelt the failure of the whole exercise. They obstinately refused to believe the remonstrations that deposits into banks of demonetised notes didn't make them legit per se and that the ongoing scrutiny would call the bluff of the crooked depositors.
There are the first green shoots of direct achievement of demonetisation visible now. There are credible reports that as many as Rs 37,500 crore of deposits have been unclaimed by nearly 2.37 lakh deregistered companies.
The government had made a follow-up strike soon after demonetisation. Freezing bank accounts of as many as 2.97 lakh companies suspected to be shell companies were ordered after they were deregistered. Out of them, only 60,000 have come clean to claim their bank deposits.
The vast majority, i.e. 2.37 lakh companies have apparently had a troubled conscience and chosen not to stake any claim on a whopping Rs 37,500 crore of deposits.
To be sure, there may be genuine reasons for this indifference, like the company promoters being too old or abroad, etc., but that is not likely to be substantial. For the majority of the shell companies, the wisdom lay in cutting their losses and possible prison terms for their promoters hiding black money behind shell companies. Discretion is the better part of valor. Foregoing Rs 37,500 crore is any day a lesser loss for them than walking into the trap laid by the government with grim consequences including a prison term when a much larger cache is unearthed on scrutiny. A bulk of the deposits is suspected to have been made during the tumultuous days of demonetisation.
Emboldened by this green shoot, the Modi government is reportedly hoping for a rich cache---Rs 3 lakh crore of dubious deposits into banks. One hopes this revelation at least casts aside the prejudice and blinkers of Modi detractors. The prime minister himself admitted that there would be labor pains caused by the cataclysmic demonetisation but the nation would benefit in the long run. The Modi government's first term in office has resulted in a frontal attack on black money to show as its crowning achievement.
(The writer is a senior columnist and tweets @smurlidharan)