Finance Minister Arun Jaitley on Wednesday asserted that any attempt to measure the success of the government’s demonetisation exercise on the basis of the amount of money that stayed out of the system was flawed since the confiscation of money had not been the objective.
Reacting to RBI data showing that ₹15.28 lakh crore, or almost 99%, of the demonetised ₹500 and ₹1,000 banknotes worth ₹15.44 lakh crore had returned to banks, Mr. Jaitley said the government had met its principal objectives of reducing the reliance on cash in the economy, expanding the tax base and pushing digitisation.
“That people have been compelled to deposit even black money into banks is itself a good evidence of its [success],” the Finance Minister said, pointing out that the high growth in income tax returns and the robust GST inflows indicate that more and more people now prefer to undertake ‘white money’ transactions.
“We have more taxpayers both on direct and indirect tax, as reflected in the 27% rise in personal income tax returns filed and the GST collections in its first month — a larger tax base, more digitisation, lesser cash, integration of the informal economy with the formal economy, which was also the principal objective of demonetisation,” he said.
While the volume of cash in the economy that was ‘predominantly cash-based before demonetisation’ had declined by 17%, Mr. Jaitley said the impact on terror activity was clearly visible in strife-torn States such as Chhattisgarh and Jammu and Kashmir.
“It’s unfortunate that those who never acted against black money, even when they were in power, were perhaps not clear about the objective of demonetisation and tried to confuse it as how much money stayed out,” he said, stressing that this was not about ‘confiscation of money.’
In a statement, the finance ministry said that demonetisation had been ‘immensely beneficial to the Indian economy and people’ and argued that expectations of some people about ‘a very large shock to economic growth on account of demonetisation have been belied.’
“India has continued to be on path of one of the strongest growths in the world. The two big measures of demonetization and introduction of GST were humongous measures which had changed structural and ethical foundations of Indian economy. Government has been able to manage the transition extremely, effectively and with the least pain,” the ministry said.