Finance Minister Arun Jaitley said that confiscation of money wasn’t the objective of the Centre’s demonetisation exercise and those who never acted against black money while in power were trying to create a confusion that the success of note-ban hinges on the amount of money that stays out of the system.
Reacting to the Reserve Bank of India’s annual report, as per which 99% of the Rs 500 and Rs 1000 notes worth Rs 15.44 lakh crore whose legal tender nature was scrapped had returned to banks, the finance minister asserted that the government had met its principal objectives of reducing the reliance on cash in the economy, expanding the tax base and pushing digitization.
“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 digitization, 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 Indian economy that was ‘pre-dominantly cash-based before demonetisation’ has come down by 17%, the finance and defence minister said that the impact of the note-ban on terror activity can be clearly seen in strife-torn States such as Chhattisgarh and Jammu and Kashmir where a large number of stone throwers, who were paid in cash, are no longer active.
“As far as detection of fake currency is concerned, it is the first time the RBI has scrutinised each and every note to determine fake currency… Some have commented that that the only objective of demonetisation was to keep money out of the system. 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,” Mr Jaitley said, stressing that this was not about ‘confiscation of money.’
“That people have been compelled to deposit even black money into banks is itself a good evidence of [its success],” the Finance Minister said, before 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.
“With RBI disclosing the numbers of returned notes today and the measure having been successfully implemented, the debate should be over,” said Economic Affairs Secretary Subhash Garg, calling for a conclusion of note-ban linked arguments as the “short-term negative impacts on economic activity have played out fully and long-term positives will continue to strengthen fundamentals”.
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 demonetisation and introduction of GST were humongous measures which had changed the structural and ethical foundations of the Indian economy. Government has been able to manage the transition extremely, effectively and with the least pain,” the ministry said.