Most people don't want the headache of black money.

Three government reports have estimated the amount of black money stashed abroad at anything between $3 billion and $490 billion, wrote S Chatterji. According to two agencies the amount of black money abroad is between 0.2% and 7.4% of India's gross domestic product (GDP). "It appears that a greater proportion of the concealed wealth is lying within the domestic economy and only a small fraction is outside the country." Previously most of the black money was invested in real estate. This was most convenient for the rich because they could pay tens of millions in cash, on which they had not paid income tax. On 8 November 2016 Prime Minister Modi resorted to demonetization of high value banknotes so as to neutralize all those sitting on large piles of illicit cash. Modi thought that most of the currency held by individuals will not be returned to banks for fear of being arrested for not paying taxes and the Reserve Bank (RBI) would be able to pay at least Rs 3 trillion in dividend to the government, equivalent to the amount of notes extinguished. Unfortunately, Modi's hopes were belied when 99.3% of banknotes made their way back to the RBI. The other hope was that people will switch to digital payments which can be easily tracked by the government. That also did not materialize as the amount of currency in circulation returned to levels higher than before demonetization. The amount of currency in circulation was Rs 17.97 trillion before the ban, which had risen to Rs 20.15 trillion by November of 2018. Instead of paying a higher dividend, the RBI was able to pay $5.5 billion less to the government, after paying for the cost of printing new notes. In an effort to eradicate black money from real estate transactions the government passed two acts, the Real Estate Regulation Act (RERA) and the Benami Transactions Amendment Bill, and the RBI is to stop printing Rs 2000 notes and gradually withdraw them from circulation. However, most people cannot afford to buy real estate because of astronomical costs and because it is not possible to invest small sums. Hence, ordinary people, including the poor, invest in gold in the form of jewellery. According to the World Gold Council, Indian households own 23,000-24,000 tonnes of gold, valued at around $800 billion. This is useless as investment because there is no income, a large component of the value of jewellery is labor cost and the value of gold may fall. So, why do people waste money on gold? Because they have no trust. Mutual funds do not disclose investments in risky assets. India has the highest number of companies with triple A ratings, most of which are probably dubious. And, the government deliberately falsifies data to make them look better. If politicians respect citizens instead of treating us as crooks and trying to trap people with sudden changes in rules it will earn our trust. Else, people will try to protect what they have.