Prime Minster Narendra Modi’s announcement to withdraw ₹500 and ₹1,000 notes was a well thought-out plan executed with near-perfect precision by a select team consisting of Finance Minister Arun Jaitley, officials of the PMO and the RBI.
The plan to demonetise the currency was proposed during former RBI Governor Raghuram Rajan’s tenure. The Government printing presses that had been printing the currency for over six months were told to ensure that the news was not leaked.
The RBI had suggested issuing ₹5,000 and ₹10,000 notes, but it was not accepted by the government.
According to those in the know of the development, “It was a work-in-progress. In fact, this was to be done even earlier, but the government was waiting for the Income Declaration Scheme — one-time compliance window — to end. It was not a hurried decision. There was no compromise of the printing press for the government to take this decision.”
“When IDS did not give the desired results, the government was left with no option but to take this step,” said an official. Though the government had not fixed any figures for IDS, it is believed that there is still some undisclosed black money in the market.
By the end of September when the scheme closed, 64,275 declarants disclosed an amount of ₹65,250 crore. The figure could hit ₹70,000 crore once all the numbers are tabulated. “Since the government had committed itself to cleaning the economy, the only option available was to demonetise some high denomination currency,” said a source. With just two-and-half years left for the general elections, the government is leaving no stone unturned. Besides, the move will also have an impact on the upcoming State Assembly elections.
Sources said that the central board of the RBI met late evening on Tuesday to approve the decision and then it was quickly followed by the meeting of the Cabinet to ensure that people did not have sufficient time to convert their unaccounted wealth in currency notes to other forms.
“The fact that 70 per cent of the new notes are already printed shows that the government was prepared for it. There will be some teething problems initially, but then things will settle down,” said another official.