Narendra Modi’s demonetisation plan was initially planned to wipe out hoards of black money In his November 8 address, where he announced that Rs 500 and Rs 1,000 notes would not longer be legal tender, the prime minister spoke dramatically of currency notes stashed under beds and in gunny bags. Scrapping large banknotes is seen as a realistic way of tackling the informal economy by some economists, notably Harvard professor Kenneth Rogoff.

Of course, India’s demonetisation has got the wrong end of the stick. Rather than ban large notes, the drive actually ended up adding a larger bill to the pile: the Rs 2,000 note, double the value of the largest banknote till last month. Far from helping wipe out cash hoards, this large note, if Rogoff’s theory is to be believed, will actually provide a fillip to the informal economy, of which the so-called black money is a subset.

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Show me the money (in Rs 2,000 notes)

Sure enough, the past few days have seen headlines about income tax and police raids across the country, with the authorities discovering large stashes of new Rs 2,000 notes. Given that the new banknote is being carefully rationed by the Union government, the raids have raised some serious questions about how these people have managed to lay their hands on so much of the new currency.

The latest raid occurred on Saturday as a law firm in Delhi was found holding around Rs 2.5 crore in new notes. Earlier on Saturday, Union government officials seized Rs 24 crores in new Rs 2,000 notes from a car in Vellore, Tamil Nadu. On Wednesday, a Bharatiya Janata Party leader in West Bengal was arrested in possession of 33 lakh in newly-issued Rs 2,000 notes. Earlier on December 2, another BJP leader was arrested with over 900 new Rs 2,000 notes.

Line up and outrage

In a public database of new currency seized, curated by public policy professional Meghnad S, nearly Rs 160 crore in new notes seems to have been recovered in raids and arrests till now. Given that the common man is currently braving it out in ATM lines for a new note or two, with a limit on Rs 2,500 per day on ATM withdrawals, and a weekly limit of Rs 24,000, it is more than ironic that at the same time, large stashes of new currency notes are being recovered in raids.