NEW DELHI: The Congress party on Monday sharpened its attack on the Prime Minister Narendra Modi-led Union government after the minutes of the Reserve Bank of India (RBI) board meeting on demonetization revealed that the central bank had “serious reservations" about the centre’s plan to withdraw high-value currencies.
The opposition is unlikely to let go of the opportunity to target the Bharatiya Janata Party (BJP)-led National Democratic Alliance government on the fresh revelations, given that the national polls are just a month away. The Election Commission on Sunday announced that the Lok Sabha elections will be held between 11 April and 19 May over seven phases.
Addressing a press conference, senior Congress leader and former Union minister Jairam Ramesh said that it was clear from the minutes of the RBI meeting, accessed through a right to information (RTI) application, that the central bank was pressurized to agree to demonetization.
“If there is one decision in the last five years that has compromised the Indian economy, then it is demonetization. Even today, the country is suffering because of the decision of demonetization," Ramesh said.
“Black money did not come back, terrorism increased, counterfeit currency is still in circulation and we are not a cashless economy—every goal of demonetisation failed. Watch the people of India call out Modi’s biggest scam till date," the Congress party tweeted.
However, Gopal Krishna Agarwal, BJP’s national spokesperson on economic issues, countered the argument, saying: “Demonetization was part of the government’s move to tackle black money and fight corruption. It cannot be observed in isolation. It led to the establishing of audit trails and ownership of black money."
According to the minutes, hours before Modi announced the note-ban decision on 8 November, the RBI board had cautioned the government that demonetization would not have a material impact on black money. At around 5.30 pm in its 561st meeting, central bank board members warned that since most of the black money was held in gold and real estate, and not in cash, the move might not get the desired results.
However, the government, in its submission, argued that there had been a steep rise in the circulation of ₹500 and ₹1,000 notes in the previous five years. “As per the government letter placed before the board, the economy had grown by 30% during 2011-12 to 2015-16, whereas the bank notes in the denomination of ₹500 and ₹1,000, grew by 76.38% and 108.98%, respectively, over the same period," the minutes said.
In response, a section of RBI board members countered the government’s view saying that the growth rate mentioned was in real rate, while the growth in currency in circulation was nominal.
“Adjusted for inflation, the difference may not be so stark. Hence, the argument does not adequately support the recommendation," the minutes noted.