The RBI, too, in its affidavit stated that due course of was adopted and it was the one which really helpful the demonetisation.

What the Government and the RBI affidavits don’t point out is the truth that the RBI’s advice for the noteban – a procedural requirement – got here after the central financial institution critiqued lots of the authorities’s justifications. These have been placed on document simply hours earlier than the announcement of the choice as minutes of the RBI’s Central Board assembly.

The key omissions from the affidavits:

i. Currency in circulation (CIC) as proportion of GDP: This was a key metric cited to justify demonetisation. “The magnitude of cash in circulation is directly linked to the level of corruption,” stated PM Modi in his speech on November 8, 2016. “The ratio of CIC to GDP has been 11% or more in the last five financial years beginning from 2011-12 to 2015-16,” the affidavit stated. Quoting different experiences, it famous that at 11.55%, India’s Cash to GDP proportion ratio was a lot increased than that for the US (7.74%).

What the affidavit didn’t point out: CIC as a proportion of GDP jumped again to pre-demonetisation ranges inside three years. The RBI’s Annual Report for 2019-20 states: “…the currency-GDP ratio increased to its pre-demonetisation level of 12.0 per cent in 2019-20 from 11.3 per cent a year ago…” This ratio rose additional to 14.4 per cent in 2020-21 earlier than declining to 13.7 per cent in 2021-22, based on RBI.

ii. Steep rise within the circulation of Rs 500 and Rs 1,000 notes: “Increase in circulation of bank notes of denominations Rs 500 and Rs 1,000 vis-a-vis that of Rs 50 and Rs 100 for preceding 5 years (as per RBI data) had shown a steep rise for the two highest denominations i.e., 76.38% for Rs 500 and 108.98% for Rs 1,000,” the affidavit states, including this steep rise in contrast with the rise within the dimension of the general economic system makes it inexplicable. “Further, as per the data available in the Economic Survey for 2014-15 and 2015-16, the size of the economy has grown less than 30% from 2011-12 to 2015-16,” it states.

What the affidavit didn’t point out: The RBI’s Central Board flagged a flaw on this evaluation of the federal government. “The growth rate of the 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 this argument does not adequately support the recommendation (for demonetisation),” state the minutes of the RBI’s central Board assembly held on November 8, 2016 at 5.30 p.m., simply two and a half hours earlier than the PM introduced the demonetisation.

iii. Quantum of pretend forex: Fake forex notes within the system have been the primary of the “three specific mischiefs, which had a serious adverse impact on the Indian economy over the past year” based on the federal government affidavit.

What the affidavit doesn’t point out: The RBI Central Board’s response. “While any incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation (over Rs 17 lakh crore) is not very significant,” said the minutes of the RBI Central Board assembly.

iv. Use of Rs 500 and Rs 1,000 notes for storing black cash: The second “mischief” demonetisation was to deal with was the “storage of unaccounted wealth in the form of high denomination notes which happened to be fake in many instances”, based on the federal government affidavit.

What the affidavit doesn’t point out: The RBI Central Board dismissed this declare. “Most of the black money is held not in the form of cash but in the form of real-sector assets such as gold or real-estate and that this move (demonetisation) would not have a material impact on those assets,” said the RBI minutes.

v. Use of pretend forex for terrorism: The third “mischief” demonetisation sought to focus on, based on the affidavit, was using faux forex for terrorism and different subversive actions.

What the affidavit doesn’t point out: The subject of pretend forex or high-denomination notes being siphoned in the direction of terror finds no point out within the minutes of the RBI Central Board assembly.

vi. Timed to learn from a scheduled change in forex notes: In its affidavit, the federal government stated RBI was, in any case, within the strategy of introducing a brand new collection of forex notes and that the choice to demonetise merely tried to learn from that timing. Further, the RBI, in session with the federal government, was engaged on the brand new collection since January 2014.

“The Government of India and the Reserve Bank considered that the introduction of new series of notes could provide a very rare and profound opportunity to tackle all the three problems of counterfeiting, terrorist financing and black money by demonetisation of Rs 500 and Rs 1000…,” states the affidavit

The affidavit additionally states that “It was also presented (to the RBI’s Central Board) that such a proposal (demonetisation) could not have come at a more opportune time than coinciding with the introduction of the MG (new) series of notes.”

What the affidavit doesn’t point out: There was no point out of such an “opportune” timing within the RBI Board’s minutes. Also, if the choice to demonetise was profiting from the RBI’s preparations to swap previous collection of notes with the brand new ones, why did remonetisation run into so many issues. The RBI constituted a Task Force for recalibration of ATMs on November 14, 2016, virtually per week after demonetisation.

Emails to the Union Ministry of Finance and the Reserve Bank of India didn’t elicit any response.