December 27, 2016

Demonetisation Fallacies and Demonetisation Math

By Vivek Dehejia, Jagdish Bhagwati, Pravin Krishna

In this mint article, Vivek Dehejia, Resident Fellow at the IDFC institute, along with Jagdish Bhagwati and Pravin Krishna explain the myths surrounding demonetisation and the numbers behind the entire scheme

"First, it is frequently asserted that the return into the formal monetary and banking system of a large percentage, perhaps 80% or more, of the old notes represents a failure of the policy. This is a fallacy which results from the misunderstanding that unaccounted money that is deposited into bank accounts has been converted successfully without penalty from black into white—which, actually, is not the case. The current rules dictate that deposits of unaccounted money will be taxed at 50%—with a further 25% taken by the government (into the Pradhan Mantri Garib Kalyan Yojana) as an interest-free loan for a period of four years."


Read the entire article here 

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