India Sees Cash Ban Exposing $74 Billion of Unaccounted Moneyby
Says about 4-5 trillion rupees of currency will be undeclared
India had budgeted 5.3 trillion rupees deficit for FY17
India’s government estimates that its clampdown on cash will uncover as much as $74 billion of unaccounted money, the first time that Prime Minister Narendra Modi’s administration has put a figure on the potential size of the nation’s shadow economy.
The government expects that between 4 trillion rupees to 5 trillion rupees ($74 billion) of now banned currency notes won’t be deposited in banks, Attorney General Mukul Rohatgi told the Supreme Court on Tuesday. This implies that about a third of the nation’s 500 and 1,000-rupee notes that were in circulation were stashed away illegally to avoid tax.
Modi last week announced the decision to scrap high-value notes in his biggest steps against tax evasion and graft. Citizens have until Dec. 30 to deposit their worthless notes in bank accounts to re-validate the amounts; big deposits will be matched against income statements and discrepancies will be investigated.
Critics of the move -- which sucked out about 15 trillion rupees of currency in circulation -- say it only hurts the common man in a nation where 98 percent of consumer payments are still in cash. Supporters say the step can flush out so-called black money from the $2 trillion economy, as much as one-fifth of which is estimated to be unaccounted for.
The government’s estimate is in line with those from private economists, which range between 3 trillion rupees and 6.2 trillion rupees. Modi’s administration had budgeted a deficit of 5.3 trillion rupees in the year through March 2017.