Finally, the Reserve Bank of India (RBI) has come out with its annual report accepting that almost all the notes that were banned by the government last year found their way back in the system in the form of deposits - much against the belief that people holding unaccounted cash will avoid depositing old notes in the banks.

In its annual report released on 30 August, the bank reported that Rs 15.28 lakh crore worth of the Rs 15.44-lakh-crore demonetised currency notes, had come back into the system. The RBI release report says almost all Rs 1,000 notes in circulation have returned barring 89 million pieces.

An expensive affair

The RBI also said that it spent Rs 7,965 crore on printing new currency notes to remonetise the economy as against Rs 3,420 crore spent in the previous year.

During remonetisation, RBI supplied 3.5 billion notes of Rs 2000 and 7.2 billion of the new Rs 500.

The total number of currency notes supplied in 2016-17 amounted to 29 billion compared to 21.2 billion notes a year ago.

Embarrassment for the government

Ever since Prime Minister Narendra Modi announced demonetisation of 86% of the currency in circulation, the RBI, as well as the government, faced severe criticism from all quarters.

The decision lead to a fall in the growth of the economy in the last financial year. India's full year GVA (gross value added) growth declined from 7.9% in FY 2015-16 to 6.6% in FY 2016-17, the blame for which can be laid on demonetisation.

However, the government had projected the demonetisation drive as a step against black money, which lead to windfall gains for the government in the form on reduced liability for the RBI for all those notes that do not come back in the system.

But, much against the initial projection, almost entire amount of money – whether black or white- has found its way into the system.

This year, RBI's dividend to the government also came down to Rs 30,659 crore - less than half the amount (Rs 65,876 crore ) transferred last year.

Can the government defend itself?

The government as well as the RBI were on the back-foot from the moment Modi announced demonetisation in the country. However, to defend the decision of the head of the government, the administration has come up with different theories to justify the decision.

Even though RBI has released its number of old note deposits now - eight months after the deadline to deposit old notes got over - there was not an iota of doubt in the government echelons that a large number of banned notes had been returned.

This is why Finance Minister Arun Jaitley had begun to argue that not all deposited notes can be recognised as white money. The government, Jaitley said, had initiated investigation on all those people whose declared income in previous years as less than the deposits made in 2016-17.

While it is true that not all old notes can be considered white money, but it also true that not all black money in the economy is held in cash.

A majority of the black money is invested in the real estate sector and in gold, which the government has no means to detect. The RBI issued 74 notifications in 50 days of demonetisation, suggesting it was shooting in the dark to stop people from depositing their money, irrespective of whether it was black or white.

While the government would definitely be able to unearth some amount of black money from the deposits made by individuals as well as companies, it would be naïve on the part of people and foolish on the part of government to expect that the amount revealed could justify the cost of demonetisation paid by the country.