1. Successful demonetisation will help up revenues in long run: World Bank

Successful demonetisation will help up revenues in long run: World Bank

Successful demonetisation will help in raising revenues on sustained basis as more and more people will come under the tax net, says a World Bank report.

By: | New Delhi | Published: June 4, 2017 1:18 PM
World bank on demonetisation, successful demonetisation, world bank, demonetisation long run impact, demonetisation effect, demonetisation effect on gdp The World Bank report is of the view that demonetisation has the potential to accelerate the formalisation of the economy. (Representative Image: Reuters)

Successful demonetisation will help in raising revenues on sustained basis as more and more people will come under the tax net, says a World Bank report. During 2016-17, India generated additional tax revenues as unreported cash identified both through the amnesty scheme and demonetisation were brought under the tax net. Gross tax revenue, including states’ share, surpassed budgeted target (of 10.8 per cent) at 11.3 per cent, which was mostly due to higher-than-expected excise collections on petroleum products.

Even though, demonetisation had only a neutral effect on direct taxes, which fell within the budgeted target of 5.6 per cent of the gross domestic product (GDP), it said. “Going forward revenues may increase permanently if demonetisation is successful in raising the amount of income reported to tax authorities,” World Bank said in a chapter titled ‘India’s Great Currency Exchange’ in its latest ‘India Development Update’. On November 8, Indian government had pulled out old Rs 500 and Rs 1,000 currency notes from circulation with immediate effect, which accounted to almost 86 per cent of cash in circulation.

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The World Bank report is of the view that demonetisation has the potential to accelerate the formalisation of the economy. Informal economy accounted for over half of India’s GDP as of 2008-09 and 82 per cent of non-agricultural employment. “Demonetisation promotes a reallocation of resources from the informal to the formal economy … Many firms that had been reluctant to formalise now adopted digital payments, moving a step closer to formalisation, thanks to the demonetisation exercise,” it said further.

Formalisation is ultimately a positive transformation that can lead to greater efficiency, World Bank said, adding India’s low aggregate productivity is in part due to the prevalence of a large number of informal unproductive firms.

  1. S
    Sadasivan
    Jun 4, 2017 at 5:42 pm
    The claim ,of more people coming under the tax net is wrong ,as the Blackmoney outside India remains there itself,with NOT even a pasia brought back ,as promised in 2014,before Elections.IMF and World bank want taxation and removal subsidy for Indians,even when there is NO Social Security Schemes like in the developed economies.And the pity is the developed economies offer huge subsides too!Double Whammy for the poor Indian. That is,the World bank and the IMF want austerity for Indians. And ,the so-called,demonetization was financed by USAID and the other actors were Bill Gates,Mastecard,VISA,e-bay,The ,"Better Than cash Alliance".Why would the World Bank oppose demonetization,in such a case?
    Reply
    1. S
      Sadasivan
      Jun 4, 2017 at 5:49 pm
      The real purpose,of the so-called demonetization was PROFIT for software Cos(and Cyber security due Digitization),Hardware Cos like machine-makers, Bankers, Card makers.This was being discussed by the RBI with US digital Cos from 2012.The RBI Chief then Subba Rao,started pitching for a "LESS CASH SOCIETY"...But many excuse as ,things developed were invented,World Bank's view is also such an invention and is not the actual purpose.And Bilderberg Meeting is on in the USA,from 1st to 4th June,today,last day!
      Reply
      1. S
        Sadasivan
        Jun 4, 2017 at 5:54 pm
        Recently the NDA started probing for BitCoin usage.Unlike in the Dictatorial way in which demonetization was imposed,it has started asking, "the people their views"!!!It cold have done so,with Demonetization,also. an has allowed it,Russia MAY also allow it.Central Banks want to use Blockchain tech for their own UNIQUE Digital Currencies. BoE is thinking in such terms.The aim is, NIRP and confiscation of the wealth of the citizens.Surveillance and thus taking away Liberties ,also.
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      Ashok Agrawal
      Jun 4, 2017 at 3:59 pm
      This is a correct essment. Direct and indirect tax evasion is massively prevalent in India that has caused fiscal deficit and black money. Modi Govt has largely ensured check on corruption and allocation of funds to more productive directions.GST and expanding tax base are envisaged to further revenue growth and contain fiscal deficit.
      Reply

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