Demonetisation met multiple objectives; economy now much better off: Arun Jaitley

By: | Published: August 31, 2017 5:35 AM

After the Reserve Bank of India finally broke its silence on how much of the demonetised currency has been extinguished — 98.7% of the old Rs 1,000 notes returned — the government defended the elaborate exercise saying its objects were manifold.

Reserve Bank of India, Demonetised currency, economyAfter the Reserve Bank of India finally broke its silence on how much of the demonetised currency has been extinguished — 98.7% of the old Rs 1,000 notes returned — the government defended the elaborate exercise saying its objects were manifold.(Image: IE)

After the Reserve Bank of India finally broke its silence on how much of the demonetised currency has been extinguished — 98.7% of the old Rs 1,000 notes returned — the government defended the elaborate exercise saying its objects were manifold. The note swap exercise helped reduce the size of the cash economy, correct the anonymity of cash, incentivise formalisation of the economy, expand the tax bases and give a blow to terrorist/naxal financing and with all these, launch a frontal attack on black money, it said. “It is unquestionable that both the direct and indirect bases have expanded after demonetisation,” finance minister Arun Jaitley said in a press conference convened after the release of currency data by the central bank in its annual report for 2016-17.

Stating that digitisation has got a boost, the minister said even after remonetisation, the trend sustained. He highlighted that RBI data showed the volume of currency has reduced 17% thanks to the note swap exercise. There is evidence of cash squeeze with terrorists and left-wing rebels, the minister said. Analysts have been ambivalent to the government’s claims on the efficacy of demonetisation that inflicted much hardship on people and hit industry and trade, especially small-scale units that are also big employers.

Initial trend of goods and services tax collections are encouraging and does indicate an expansion of the tax base. However, the 25% expansion in personal income tax returns after the note ban, though helped by demonetisation, is not unprecedented. In some years in the immediate past, the increase in such filings have been sharper both in percentage and absolute terms.

 

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