More than 99% of the currency that India declared void in a surprise announcement in 2016 was returned to the country’s banks in subsequent weeks, according to a Reserve Bank of India (RBI) report. The figures suggest prime minister Narendra Modi’s demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5m jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy — a key rationale for the move.

Modi shocked Indians in November 2016 when he announced on live television that all 500 and 1000-rupee notes, equivalent to about £6 and £12, would be banned in four hours’ time. People were given several weeks to exchange their demonetised currency for new notes at banks. But new notes could not be printed fast enough, and the policy sparked a months-long currency crunch that left tens of millions of Indians cashless or standing in line for hours each day to retrieve small sums of cash.

As India’s massive informal economy reeled, Modi implored the country to give the policy time to work, arguing it would flush out untaxed wealth being hoarded by wealthy Indians, help to digitise the economy — one of the most cash-based in the world — and starve terrorists and criminal gangs of cash.(theguardian)…[+]