Demonetisation gains may be just Rs72,800 crore, says Motilal Oswal report


Mumbai: Against trillions of rupees of fiscal and tax gains projected from the note ban, a domestic brokerage on Wednesday said the government may gain only Rs72,800 crore from the move—taxes, penalties worth Rs32,800 crore and Rs40,000 crore by way of surplus transfer from the Reserve Bank of India (RBI).

Many pro-demonetisation economists and analysts had in the early days of the move claimed at least 20% of the Rs15.55 trillion of cancelled money would not come back to the system, which in turn, could enable the RBI to write off that amount from its balancesheet.

The profit accretion could then be transferred to the government by the RBI as surplus transfer. While the central bank had publicly cited only Rs15.55 trillion of high value notes were cancelled on 8 November, in an RTI reply to PTI, it had said the actual quantum of bills cancelled was much higher at Rs20.51 trillion.

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But according to a report by domestic brokerage Motilal Oswal, this could just be a whimper of the initial projection at Rs40,000 crore, which means only around 3.5% of the cancelled money was not returned to the system or were black money.

The brokerage said while RBI has not provided any data on deposited notes after 10 December, calculations using official data on currency in circulation and total supply of bills by 19 December show that over Rs15 trillion has come back to the system. “Thus, the RBI could transfer a maximum of Rs40,000 crore to the government, which will be included in the latter’s non-tax revenue receipts for the next fiscal,” the report said.

Additional taxes worth Rs32,800 crore and non-tax revenue of Rs40,000 crore will add Rs72,800 crore to the government’s kitty next year, it said. But this is based on the broking firm’s assessment of the cancelled money which came back to the system till 19 December. So far, neither the RBI nor the government has quantified the money that came back to the system.

As per the brokerage’s estimates, the income tax department may be able to unearth only Rs28,500 crore as black money, representing 50% of the income considered to be declared under the Pradhan Mantri Garib Kalyan Yojana scheme. This would imply tax receipts amounting to Rs24,200 crore.