The finance ministry has asked the Reserve Bank Of India (RBI) to expedite the process of data reconciliation so that the amount of extinguished currency notes after demonetisation can be determined at the earliest, sources told FE.
A precise estimate of the banned notes will not just end wild speculations over the extent of black money in the system (the lowest estimate stands at R30,000-40,000 crore, of the demonetised currency value of R15.46 lakh crore) but also potentially boost the government’s kitty and offer it a much-needed cushion against unforeseen circumstances distorting its budgetted revenue calculations for FY18. The Budget for 2017-18 hasn’t factored in potential gains from demonetisation.
The RBI last month said the aggregating of accounting entries made at the various currency chests still required to be reconciled with the actual cash balances in order to eliminate accounting errors and double counting. “We have requested the RBI to provide details of the un-returned cash at the earliest. They are doing their bit. Hopefully, we will get to know it very soon,” said a senior finance ministry official. The government had brought in an Ordinance in December that paved the way for the government to get funds (to the extent of the value of extinguished notes) from the central Bank.
Earlier this month, economic affairs secretary Shaktikanta Das told FE the government hadn’t budgeted gains from demonetisation and if any extra money came in, it could be used to reduce borrowings next fiscal (even from the budgeted level of R3.5 lakh crore). He had said the targets of a 12.3% rise in tax revenue and a 60% jump in proceeds from disinvestment for the next fiscal were realistic and there were chances that the fiscal deficit number could be even lower than the budgeted 3.2% for 2017-18.
Any windfall gain from the note ban (either in terms of extinguished currency notes or higher taxes from declaration of undisclosed income under the Pradhan Mantri Garib Kalyan Yojana) will come in handy for the government wanting to pep up the economy, even as it stares at external risks such as protectionism in advanced economies, rising crude oil prices and interest rate hike by the US.
The data compilation on demonetised R500 and R1,000 notes is taking time as there are as many as 4,000 currency chests in India. Also, the central bank keeps currency in 19 other places. While an RBI team has completed checking the data submitted by various banks on sample basis, the process of reconciliation of the accounts are on, RBI deputy governor SS Mundra said recently. The RBI has said all restrictions on cash withdrawal, imposed after the demonetisation, will be withdrawn from March 13. The government had announced demonetisation of 86% of the value of currency notes in circulation, amounting to R15.46 lakh crore, on November 8. As of February 3, currency notes worth R10.25 lakh crore were in circulation, as the supply of notes improves, showed the RBI data.
