Second theory of ‘Scam Behind Demonetization’: An impartial evaluation

In the earlier editorial regarding the allegations of Big Scam involved in the move of Demonetization, we have mentioned that mainly four theories are given to show that this huge exercise (of so-called ‘Note-bandi’) was carried out for some selfish motive or for a scam. In the first article, we discussed the most projected ‘scam theory’ that ‘its motive was waiving off the huge loans of billionaire defaulters’. Now, we will examine the second theory in this editorial. Unexpectedly, the readers will see that, there is more substance in the second theory than the first theory; but none of these theory have enough reasoning to justify the use of term ‘Scam’ for demonetization.

II Theory of ‘leaking information to own people’

The opposition leaders especially Aravind Kejriwal, Rahul Gandhi, Mamta and Maya had alleged that, the information about demonetization was kept secret from nation, but it was leaked to the people friendly or favourite to Nrendra Modi. On some occasion they said that, BJP party-men were knowing this and that’s why a bulk of land and other property was purchased by some BJP state units, such as Bihar and Goa. They also mentioned the RBI data showing that a substantial increase had occurred in the quarter before the demonetization move i.e. in July-September quarter of 2016, when the total deposits were a record 102.08 lakh crores. By quoting this data they want to establish that this record amount was deposited by the people, who were knowing that the demonetization is coming soon.


Ambiguity in the allegations:

First of all we find that the allegation is ambiguous; as at one place, they say that only the friends and favourites of Modi were knowing; at the other place, they say that BJP’s top officials or money managers were knowing and in yet another place, they say that thousands of people were knowing, who deposited big amounts in banks during the third quarter of 2016. However, in my view there is enough substance in the statements, where they have mentioned the favourites, friends, BJP’s top officials and money managers as the beneficiaries of the alleged leak about demonetization. But the extension of beneficiaries to include all the depositors who deposited cash in any bank in any amount in the July-September quarter, can’t be acceptable. Even though, it is also worth investigating that how many and what sort of people have deposited big amounts in that mentioned quarter. 

Should be investigated but don’t presume SCAM

‘Whether there is a scam behind the demonetization or not?’ it is our one question and ‘Whether any unusual event/phenomena occurred in our banking system is worth investigating or not?’ it is another question. Hence, if we are affirmative about the second one, it doesn’t mean that we are also saying yes to the first one. People may say that, if we support the demand of an investigation, then it means that we are accepting the occurrence of scam. But it is not the case, since, need of an investigation is acceptable if any unusual happens in any crucial discipline of public life; even if we are of the opinion that there is very-very rare chance of existence of any scam.  

The arguments indicating the rare chances of Big Scam 

  1. This most important concept, must be kept in mind is that, if any amount is/ was deposited in registered banks and post-offices, on the name of its real owner itself; then it means that the owner is ready to publicly own the amount and hence, it is not black money. So, all the amounts deposited in banks before the note-bandi or after it was not Black. Moreover, there are much less chances of the cash deposited in the third quarter of 2016 that they were deposited in the accounts other than the real owners. However, let the investigation confirm this apparently sure assumption and let it investigate the amounts deposited after the announcement of demonetization.
  2. Now, all the amounts deposited in banks before the move and after the move, are under the scanner of govt. Investigative agencies and yesterday itself, the finance ministry has also asked banks and post offices to provide data about cash deposits during April 1 to November 9, 2016. However, as the opposition has raised so much doubt over the amounts deposited before demonetization; hence, it is better that, a judicial commission supervises the whole inquiry and it should be investigation of all the deposited amounts of more than 2 lakhs.
  3. There may be several reasons of increase in the bank deposits during the third quarter of 2016; like the returns on investments in gold and real estate were low, so both these options were less attractive; which had turned the conservative investor’s choice towards bank deposits. Few other reasons are also being given, such as govt. has increased pensions and maturity benefits; besides seventh pay commission’s recommendations became effective and as the future in the big investments later, was appearing good so many people deposited in the banks for investing later in any business project in the coming quarters.
  4. Regarding the instances given about purchase of lands by BJP in September and October 2016; they are not clearly denied by BJP; so we may assume these instances are not false. But, think practically, if a political party or any type of big organization implements its pending investment/ purchase plans more intensely in a brief period, then can it be called a ‘Scam’. Every big organization usually have some pending decisions of buying some big assets and for BJP, which has increased its all sorts of strengths by leaps and bounds, it was quite obvious. Usually, these pending decisions remains with the top authorities of the organizations and since, the top authority of BJP was PM Modi (may be Amit Shah too); so it was but natural that he might have directed the state units or their money managers to make the deals quicker (without telling them fully about the coming move of demonetization). Since, he is the person who knew that what he himself is going to do in early November; then ‘How it can be possible for him for not speeding up such decisions of purchases by his party? It may be called a sort of opportunism but in no case it can be termed as a scam. The ‘legal validity of those purchases’ is completely different issue and if there is any suspicion about it, then it should be investigated and made clear to all.
  5. Another instance given by Kejariwal and his imitate-rs is that the photos of a pack of Rs. 2000 notes were posted on social media, much before the declaration of demonetization and the persons who were holding and showing the pack(s) were related with BJP. Now, it must be noted that, in those posts none told that these notes will come in the system replacing any other currency notes. The posts were only telling that such new notes are going to come soon. It means that the posts were not disclosing or leaking the information about demonetization and it was evident too as no one had inferred that some notes will be banned and these notes will come in use. 

However, I’m not sure about what are the rules regarding the issue of new currency but, in my view it should also be not allowed and should be punishable that, if someone get any currency note before its actual issuance and shows it through any media. Hence, whosoever was behind the posts showing Rs. 2000 notes notes on social media should be punished. If presently, no rules are there regarding this incident, then such rules should be made.

  • There is one more ambiguity in the statements of many opposition leaders, regarding how many people were knowing about the move before its actual announcement on November 8. On one hand, they are saying that it was one man’s (Modi’s) decision and nobody was knowing about it except his loyal six member team and on the other hand, they say that so many people knew it before its announcement. However, this ambiguity can be ignored, as we know that these leaders are used to make such contradictory statements; but this fact diminishes their reliability and credibility as a rational person.

Now, let me re-emphasize that this second theory indicate a need for thorough investigation and disclosure of complete facts regarding all the instances given in its support. Even if the investigation will not reveal any sort of scam, but it is very likely to reveal some irregularities or other sorts of lessons for currency management, banking and politics.  

* Hariprakash ‘Visant’ 

Also Read:

Is there any ‘Scam’ behind Demonetization?

Benefits, failures and bad effects of demonetization: conclusion (Objective Evaluation of demonetization: Part II)

Success and failures of Demonetization/ Objective Evaluation: Part-I (Effect over terrorism, black money and corruption)

Mamata Banerjee demands all-party government without Narendra Modi



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