Less than a year later, a central bank report suggests the policy has not been very effective. It estimates that almost 99 per cent of the high value notes, which at the time of the announcement made up 86 per cent of all the cash in circulation in India, were deposited or exchanged for new notes.
Instead of flushing out the black money, the Modi government may have inadvertently helped wash the funds clean.
The government, in anticipation, set a Rs250,000 limit (about $3,900) on the amount that could be deposited before declaring tax records.
What it failed to foresee though was the elaborate schemes that sprang up to circumvent that limit. Some offered others a fee to deposit money on their behalf, while others allegedly used donations to Hindu temples to launder funds. The bank’s report suggests that the policy has had little success for the disruption it has caused to one of the world’s fastest growing economies.
