The Supreme Court has given its final verdict on cases over the legality of Demonetisation by the Indian government in 2016. It has upheld the legality of demonetization by a majority of 4:1. The demonetization of the Rs. 500 and Rs. 1000 currency notes in India deprived about 85% of banknotes in circulation at that time.
Why the case against Demonetisation?
The decision of the government became a political controversy at that time. Apart from that, questions were raised over the legality and social, and economic impacts of this decision. Consequently, a total number of 58 petitions were filed. They questioned demonetization’s legal nature. However, the pending hearings delayed this verdict for over 5 years. Now, this judgment was the last platform for deciding whether the decision was constitutional or not.
Legal nature of the Demonetisation Decision
Section 26 (1) of the RBI act says that every banknote issued by the Reserve Bank Of India, guaranteed by the Central government, is a legal tender for payments in the country. The next section 26 (2) gives the power to the Central government to declare any particular series of notes to cease as legal tender. It is done through the recommendation of the Central Board of RBI.
The judge who gave the verdict against this decision was of the view that for such decisions an independent recommendation from the RBI is a pre-condition. But, we can say that the demonetization debate has got a final closure.
Unclear goals
While upholding Demonetisation, SC mentioned that it is not right to question the legality of this issue. But, the government said that demonetization aimed to deal with black money, corruption, and fake notes. But, these social and economic goals have not been properly met. Although the press release of demonetization mentioned these goals it gave no information on how they will be met.
Moreover, there were additional objectives like promoting digital payments and formalization of the economy were done later.
Time to move ahead from Demonetisation
At the time of demonetization, the cash in the market was treated wrongly as black money. A matter of debate is that the currency in circulation has increased 2X in the last six years. Also, cash is used for other daily purposes too. But, the government should not ponder over it.
On the brighter side, the use of digital payments has increased. So, we can expect that the use of cash might decrease in the following years. There has even been a reduction in the use of coins over the last few years.
It has been six years since the decision to demonetize. Also, its direct impacts were seen in the following 2-3 years that have passed down. At the same time, the top court has given a final verdict on the issue. Now, it’s time to put demonetization on the back wheel. The government and lawmakers need to focus on the new issues and developments in the financial sector to grow the economy of India.
