Black money would be destroyed
Initial news of massive raids. Political opponents targeted. News of currency seized from various people. Widespread understanding among critics and supporters alike that the objective was to strangle cash flows (legal or otherwise) of political opponents during the upcoming election campaign in Uttar Pradesh.
ISI fake currency thwarted
Widely criticized through various versions of "amputating a leg to lose weight" or "bombing a city to kill criminals in it", this was an irrational goal to begin with, to go through an exercise of this magnitude, expense and cost to economy to flush out a relatively minor number of notes that would at best lose value they didn't have to begin with.
The new notes would have special security features to prevent counterfeiting
Initial reports in media suggested that the new notes would have special features that prevented counterfeiting them. At the very least, having to imitiate a new design would slow the counterfeiters down and reduce the amount of fake currency in circulation.
Various reports in a pliant news media even took claims of special GPS chips embedded in notes and discussed them seriously, creating a perception among the masses that the new notes would be extraordinarily resistant to misuse or imitation.
Tax Collection would increase
Almost 25% increase in tax collection has been unquestioningly gushed over by a pliant media. This increase in tax collection has been attributed to demonetisation.
Having cash in itself is not illegal, unless it is established that the cash would not be accounted for while paying taxes. Seizing it without evidence of wrongdoing probably is, but the government legally created impunity for tax officials, who are no longer required to explain their actions to anyone..
Fake currency made legitimate!!!
The relentless crowds and high stress environment at banks did not allow for adequate examination of notes deposited and the overall understanding is that a large number of fake notes got deposited and converted into real money in accounts or converted to new currency - in effect robbing the country far worse than them being in circulation.
The new notes had no special features that prevented counterfeiting
The new notes are of poor quality and apparently easier to counterfeit. Various leaders and affiliates of the ruling party have been caught with counterfeited notes and the equipment to make more. The trust in the notes is very low and "even the real notes look fake". Hurried printing has resulted in real notes not having all features they should have.
Among early news of counterfeiting included school children who had photocopied a Rs.2000 note and used it to dupe a sweets shop owner when they purchased treats using it.
There has been no change
Tax collection has been increasing year on year for a long time now, and if you look at the trend over the years, this year's increase in collection fits the curve.
82% of the money demonetised was rapidly returned to the banks about a fortnight before the last date to deposit demonetised notes, and the crowds continued unabated way after the RBI stopped updating figures on money returned. It has been over 7 months now and they still have not given out the final figures related with demonetisation, .
RBI would transfer profits to the government
RBI transferred Rs 30,659 crore as surplus to govt. This is lower than the Rs 65,876 crore last year - less than even half the amount. The budget has assumed Rs 75,000 crore would come from RBI and PSBs.
Not just is the windfall absent, the government has not even been able to reach half the amount of the previous year.
The windfall from demonetisation would fund welfare
In addition to the losses made by the government, the citizens have made losses - from disruption and decimation of livelihoods to time taken off daily wage work and expenses.
There will be no benefit/compensation to them. Likely, a reduction of existing benefits will happen due to the lack of funds this "minor inconvenience" will cause.