Is no Black money existed in the economy? RBI governor avoids query on full return of banned notes

Reserve Bank of India (RBI) Governor Urjit Patel is slated to appear before the Parliamentary panel on Wednesday in order to provide clarification on an array of queries related to demonetization.
Reserve Bank of India (RBI) Governor Urjit Patel is slated to appear before the Parliamentary panel on Wednesday in order to provide clarification on an array of queries related to demonetization.

Mumbai, Dec 7 :  Reserve Bank of India Governor Urjit Patel avoided answering a question that if all the scrapped notes in circulation came back as deposits, this would mean no black money existed in the economy.

The governor, who was addressing the media following the meeting of the Monetary Committe on Wednesday, said that the cost-benefit of the move to ban higher denomination notes was in the fact that it would have several positive outcomes in the medium to long term, despite the short-term difficulties “which we all know of.”

Patel said that the step would lead to great transparency in the economy, increasing tax compliance, make it difficult to forge or fake currency notes because new features have been added in the new currency notes and thrust digitisation plan in the economy.

He said it would also bring down the cost of printing money since the quantum of paper currency needed in the economy should come down.

The question asked was whether a cost-benefit analyses had been done on demonetisation and if all the banned notes in circulation came back into the banking system, would it mean there was no black money problem. The RBI governor did not choose to answer the second part of the question.

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