Demonetisation by itself will not impede future black money flows: UN report

As India completes six months of demonetisation on Monday, a United Nations report assessing its impact said the government needs to take more measures to unearth all forms of undeclared wealth and assets as note ban by itself will not impede future black money flows.

“The measure did not by itself impede future black money flows in new denominations. While the estimates of size of black money vary at about 20%-25% of GDP, cash is estimated to make up only about 10% of that value. Thus complementary measures will be required to target all forms of undeclared wealth and assets,” the United Nations ESCAP said in the Economic and Social Survey of Asia and the Pacific 2017 released on Monday.

The report also said that the measure taken by Prime Minister Narendra Modi on November 8 last year had greater and longer-lasting impact on lower income individuals, households and businesses that had difficulty insulating themselves against the shock.

It said the rural income and consumption were impacted due to a decline in prices of agriculture products though it was not reflected in official data of national accounts which measures agricultural data in terms of quantity.

The report, however, said that more awareness about alternatives to cash transactions post demonetisation is there but moving towards a cashless economy will also require addressing household determinants of cash dependence beyond technology adoption, including low financial inclusion, high informality and low financial literacy.