‘[Black money] is gonna return to the same amount… There are loopholes. In India, there is a loophole for everything.’
New Delhi, India – Opposition parties in India have called for street protests to mark one year since the government of Prime Minister Narendra Modi banned high denomination banknotes in a stated attempt to target undeclared “black” money and fight corruption.
At least 18 opposition parties, including the Indian National Congress, will mark the anniversary as a “Black Day”, accusing the government of harming the country’s economy with its policies.
“Demonetisation achieved nothing. Hence, we are observing November 8 as a Black Day,” said Palaniappan Chidambaram, former finance minister of the Congress party, which ruled between 2004 and 2014.
“Demonetisation was illegal. It violated many laws and cases are pending before the Supreme Court,” he told Al Jazeera.
Prime Minister Modi personally led the shock move on November 8 last year to outlaw 86 percent of the cash in circulation, making the announcement via a televised address.
The old tenders of 500 ($7.73) and 1,000 rupees ($15.45) became illegal within hours of Modi’s announcement.
Indians only had months to exchange the old notes for new ones.
Demonetisation was illegal. It violated many laws and cases are pending before the Supreme Court
The government expected that a large amount of black money would not make it back, and therefore would be wiped from the system.
But the Reserve Bank of India said in August that 99 percent of the estimated $242bn in high-currency bills were returned, leading to questions regarding the efficacy of the exercise.
Chidambaram said that there were suspicions that demonetisation was a device to help people with unaccounted, or black, money to convert it into accounted “white” money.
Subhasini Ali, a Politburo member of the Communist Party of India (Marxist), said the project was a “cruel attack” on the people of this country.
The left parties, including Ali’s CPI (M), have joined the protest.
“This was the most devious, dishonest and anti-people step that any government could have taken,” Ali told Al Jazeera. “The day the people fully understand what this note ban was all about, I think there will not be much future for the BJP [Bharatiya Janata Party] any more.”
The ruling party has defended its move, saying the main aims of demonetisation – fighting corruption and “black money” – have been achieved.
“There are many successes of demonetisation,” said Nalin Kohli, spokesperson for the ruling BJP, as he began to list them. “Encouraging people to go cashless, [boosting] tax compliance and simultaneously identifying suspicious accounts and transactions that will enable boost future tax collection while taking action against the guilty.”
The decision, which was widely criticised by economists and media at home and abroad, caused utter chaos as people spent months lining up to swap old notes for new.
As the prime minister asked Indians to be patient, many faced hunger and even death. According to reports, about 100 people, mostly elderly, died of exhaustion while waiting in bank queues across the country.
But in what could be interpreted as continued support for the prime minister, the right-wing ruling party won elections in the politically key state of Uttar Pradesh in March by riding on Modi’s high popularity.
Even as criticism mounts, the defiant premier insists he will not relent in his avowed fight for the poor against the rich.
“A few people who faced the heat of demonetisation are still complaining and are planning to observe November 8 [with protests]. The Congress cannot scare me by burning my effigies,” the Indian Prime Minister said on Sunday.
“My fight against corruption will not stop,” he declared as people applauded at an election campaign rally in the northern Himalayan state of Himachal Pradesh.
A year later, official data around demonetisation is still sketchy. The central bank says it is still verifying the returned notes.
India’s cash-dependent unorganised sector – which forms more than 80 percent of the economy – suffered badly, leading to factory closures and job losses.
For small businesses in the rural areas, it is practically impossible to make payments digitally, when both power outages and lack of internet connectivity hampers work
President of the National Capital Region Chamber of Commerce and Industry, HP Yadav, says micro and small industries have “suffered a lot” during and after the shock move with most firms downsizing by an average of around 20 percent.
He also argued against forcing digitisation for small businesses – a key government goal.
“One year after this was announced, our view is that a company or an individual must have freedom to choose cash or digital mode of payment. For small businesses in the rural areas, it is practically impossible to make payments digitally, when both power outages and lack of internet connectivity hampers work,” Yadav told Al Jazeera.
Before the government’s planned celebrations, an Indian minister, Jayant Sinha, on Monday described the note ban as “a resounding success”.
“When revolutionary changes take place, it takes years, decades, or even centuries before the effect of such transformations can be studied and commented upon,” he wrote in the Indian daily, Mint.
Economists have questioned the government’s claims.
“We have no real data on whether the tax base has actually expanded beyond the trend increase that was already occurring before the move,” said Jayati Ghosh, professor of economics at Jawaharlal Nehru University in New Delhi.
“There are many areas and parts of the economy that have still not recovered even to pre-demonetisation levels of activity,” she said.
Reetika Khera, an economist also based in New Delhi, said the government was not clear about what it wanted to achieve.
“Whether it was a measure against corruption, or to expand the tax base, or to increase digitisation by reducing reliance on cash, none of these objectives required demonetisation,” she said.
These objectives could have been better achieved through other reform measures, she explained, such as strengthening the tax authorities and taking action against defaulters.
“Demonetisation hurt the economy in the short run [and possibly in the longer run as well], and caused unnecessary hardship, especially to ordinary citizens,” Khera told Al Jazeera.
Spillover slowdown from the note ban saw an immediate fall in gross domestic product (GDP). Growth slid to a three-year low in the last quarter of 2016.
A Reuters poll in October said a majority of economists believe India’s economy will likely grow at its slowest pace in four years this fiscal year, particularly because of the disruptive effect of demonetisation.
“None of the three declared objectives of demonetisation – stamping out black money, ending corruption and ending counterfeiting – has been achieved,” said Chidambaram, the former finance minister of the Congress party.
“The decline in GDP from 7.0 percent [in the third quarter of last year] to 5.7 [in the first quarter of this year] has cost the economy 100,000 crore ($15.45 billion) in a period of six months. The annualised cost will be higher.
“Millions of jobs in the informal sector were lost. Daily wage earners were pushed into penury and devastated.”
But Prime Minister Modi remains unfazed by the criticism.
On Sunday, he boasted that 300,000 companies have shut down after demonetisation and a probe into the financial dealings of 5,000 such firms revealed massive fraud.
India’s opposition parties have failed to mount a credible challenge to Prime Minister Modi since he came to power in a 2014 landslide vote.
With events such as the Black Day protests on November 8, opposition parties are attempting to shift the narrative from a clash of personalities – where Modi is a clear winner – to a debate about the government policies.