New Delhi: In what the Prime Minister and his government has described as a decisive war on corruption and black money, for the very first time, it has attempted to quantify what it reckons is the size of the shadow economy. It is generally believed that total currency in circulation in India is around Rs 17.77 lakh crore. As much as 86 per cent or Rs 15.64 lakh crore of this is high denomination notes of Rs 500 and Rs 1000 which has now been demonetised, sucking that much out of the system.
Speaking to this newspaper, Attorney General Mukul Rohatgi explained the dynamics at work. “There is roughly Rs 17 lakh crore rupees in circulation. Our estimate is that approximately Rs 11 to Rs 12 lakh crore will come back into the banking system through this scheme. Again, our assessment is that Rs 3 to Rs 4 lakh crore which doesn’t return is prima facie is the black component of the currency in circulation. The idea being that if Rs 3 to Rs 4 lakh crore is not deposited, it is a straight write-off viz. the debt of government of India.”
The government reckons that its crackdown on cash will uncover as much as $60 to $74 billion of unaccounted money. This is the first time that an official of Prime Minister Narendra Modi’s administration has put a figure on the potential size of the nation’s black cash parallel economy. This means that about one-third of the nation’s 500 and 1,000-rupee notes that were in circulation were stashed away illegally to avoid tax.
In any case, Rohatgi added that with as much as Rs 10 to Rs 12 lakh crore returning as deposits, “the banking system will be flush with funds which means that they will start lending at lower interest rates, boosting both consumption and growth. This is what I told the apex court and I am very clear that its gains and benefits far outnumber the short term pain and disruption in people’s lives. Please understand that this dislocation is primarily for the next month or so, by January, things will be back on track and engines of the economy chugging again.”
On Thursday, the Supre-me Court agreed to hear on Friday a fresh plea of Centre seeking a stay on the proceedings before various High Courts and other courts except the apex court against its November 8 decision to demonetise high denomination currency notes of Rs 500 and Rs 1,000. A bench comprising justices A R Dave and A M Khanwilkar agreed to the contention of Attorney General Mukul Rohatgi, appearing for the Centre, that proceedings in various courts except the apex court. The bench said the matter will be heard by another bench headed by Chief Justice T.S. Thakur which is hearing a batch of PILs against the Centre’s move. This move by the government once again shows its intent and resolve to go ahead to cleanse the system.