97% banned notes said to be deposited in banks in blow to Modi’s black money fight

New Delhi: Indians have deposited nearly all the currency bills outlawed at the end of the deadline last year, according to people with knowledge of the matter, dealing a blow to Prime Minister Narendra Modi’s drive to unearth unaccounted wealth and fight corruption.

Banks have received Rs14.97 trillion ($220 billion) as of 30 December, the deadline for handing in the old bank notes, the people said, asking not to be identified citing rules for speaking with the media. The government had initially estimated about Rs5 trillion of the Rs15.4 trillion rendered worthless by the sudden move on 9 November to remain undeclared as it may have escaped the tax net illegally, known locally as black money.

A full validation of the bank notes is a set back for Modi who had been relying on this move to burnish his administration’s corruption fighting credentials and boost its popularity ahead of key state elections. The anti-corruption measure has dented economic growth and forced millions into lengthy bank queues, although it remains broadly popular.

Banks have disbursed about Rs8 trillion in new currency bills, the people said. The figures of bank notes deposited are provisional and may change, they added. Finance Ministry’s spokesman D.S. Malik didn’t respond to a call and a message sent to his mobile phone.

Uttar Pradesh, a bellwether state of 200 million people that sends more representatives to India’s upper house than any other region, will vote in seven phases between 11 February and 8 March, chief election commissioner Nasim Zaidi said Wednesday. Punjab and three other states will also vote during this period to select a local government. All results will be announced 11 March.

Although Modi’s credibility has been dented, the jury is out on the long-term economic and political fallout. So far his public support remains strong, with some standing in lines waiting to access cash still voicing their approval of his decision to target unaccounted wealth. Bloomberg