India Economic Survey 2018 that was tabled in Parliament on Monday by Chief Economic Advisor Arvind Subramanian discussed impact of demonetisation on the economy in detail. Chief Economic Advisor said that there was an increase in tax payers post demonetisation. “After November 2016, 10.1 million filers were added compared with an average of 6.2 million in the preceding six years.” The level of tax filers by November 2017 was 31 percent greater. This translates roughly into about 1.8 million additional tax payers due to demonetization-cum-GST, representing 3 percent of existing taxpayers, said the survey.
The survey says, “At first blush, there does seem to have been a substantial increase in the number of new taxpayers. Figure 1 compares the total number of new taxpayers in the 13 months since demonetization (November 2016 – November 2017) with previous 13-month time windows. After November 2016, 10.1 million filers were added compared with an average of 6.2 million in the preceding six years.A rigorous assessment of the impact of demonetization, however, must account for the pre-existing trend growth in new tax filers. To address this, a regression analysis is undertaken. The result is depicted in Figure 2. Taking seasonality into account it is found that there is a 0.8 percent monthly trend increase in new tax filers (annual growth of ~10 percent). The level of tax filers by November 2017 was 31 percent greater than what this trend would suggest, a statistically significant difference.1 This translates roughly into about 1.8 million additional tax payers due to demonetization-cum-GST, representing 3 percent of existing taxpayers.”
The Narendra Modi-led NDA government introduced demonetisation in November 2016. In its announcement, the government had declared that all Rs 500 and Rs 1000 banknotes of the Mahatma Gandhi Series would be invalid. It also announced issuance of new Rs 500 and Rs 2000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes. Narendra Modi led government faced a lot of criticism post demonetisation from the opposition.
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However, in January this year, the NPCI came up with data that showcased how online payment transactions have increased in volume post demonetisation giving a shot in arm to the government which was facing constant criticism post note ban. The NPCI data said, “The rise in figure of online transactions is 11 percent higher at 1.06 billion than compared to 957 million last year. The total transactions stand at Rs 125.53 lakh crore, 20 percent higher than Rs 104 lakh crore last year in value terms.” Finance Minister Arun Jaitley will present budget 2018 on February 1.
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NPCI also said that UPI service has also substantially benefited from demonetisation exercise as the online transaction volumes soared 192% in the April-November 2017 period over the corresponding period a year ago.
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In addition to this, Reserve Bank of India (RBI) data that was released in December last year showed that the eight-month period post demonetisation impact observed mobile wallets notching up an aggregate 1,832.5 million transactions, up from 628 million transactions during the same period in 2016. The demonetisation exercise was last executed by the government once in 1946 and then in 1978—and in both cases, the objective was to take on the tax evasion by “black money” held outside the formal economy.
Economic Survey expects FY19 growth to be 7-7.5 percent versus 6.5 percent for FY18. Earlier today, President Ram Nath Kovind addressed a joint session of parliament on the first day of the budget session. Finance Minister Arun Jaitley will present Budget 2018-19 in Parliament on Februrary 1.