New Delhi: As the country completed two years of demonetisation, finance minister Arun Jailtley said that demonetisation resulted in formalisation of economy and increased tax base, prompting the government to earmark more resources for the poor and infrastructure development, even as former Prime Minister Manmohan Singh said the scars and wounds of the “ill-fated” and “ill-thought” exercise are only getting more visible with time and its deeper ramifications are still unravelling.
The opposition attacked the Narendra Modi government for unleashing “destruction” on every citizen of India with its 2016 demonetisation move that only helped the Prime Minister’s cronies.
On the second anniversary of the ban on Rs 500 and Rs 1,000 currency notes, the Congress called it a “black day” for the democracy and national economy, while the CPI-M termed it the “biggest scam in the history”.
“The cost and destruction by demonetisation were endured by every citizen of this country other than few crony capitalist friends of PM Modi. Demonetisation was a black day for our democracy and our economy,” the Congress tweeted.
Arun Jaitley’s Facebook post
Terming the criticism, that almost the entire cash money got deposited in the banks post demonetisation, as “ill-informed”, Jaitley said confiscation of currency was not an objective of demonetisation but to move towards a more formal economy that he claimed is giving rich dividends.
“Getting it into the formal economy and making the holders pay tax was the broader objective. The system required to be shaken in order to make India move from cash to digital transactions. This would obviously have an impact on higher tax revenue and a higher tax base,” Jaitley said.
In a Facebook post on the second anniversary of Demonetisation, Jaitley said in first four years of the National Democratic Alliance (NDA) government, the number of income tax returns filers has gone up to 6.86 crore from 3.8 crore in May 2014.
“By the time the first five years of this government are over, we will be close to doubling the assessee base,” he said in the post titled “Impact Of Demonetisation”.
The demonetisation of Rs 500 and Rs 1,000 currency notes in November 2016, the minister said, had resulted in “more formalisation (of economy), more revenue, more resources for the poor, better infrastructure, and a better quality of life for our citizens.”
He further said with the implementation of the goods and services tax (GST), it is now becoming increasingly difficult to evade the tax system and the indirect tax to gross domestic product (GDP) ratio has gone up to 5.4% post GST, from 4.4% in 2014-15.
The government had on November 8, 2016, announced ban on old Rs 500 and Rs 1,000 rupee notes, to curb black money in the system.
Of the Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes in circulation on November 8, 2016, 99.3% or notes worth Rs 15.31 lakh crore have returned to the banking system.
This means, just Rs 10,720 crore of the junked currency did not return to the banking system.
After the note ban, old junked notes, called specified bank notes (SBNs), were allowed to be deposited in banks with unusual deposits coming under income tax scrutiny.
Jaitley said demonetisation compelled holders of cash to deposit the same in the banks.
“The enormity of cash deposited and identified with the owner resulted in suspected 17.42 lakh account holders from whom the response has been received online through non-invasive method,” he said.
The violators faced punitive actions. Larger deposits in banks improved lending capacity for the banks. A lot of this money was diverted to mutual funds for further investments. It became a part of the formal system, Jaitley added.
He said the share of indigenously developed payment system of unified payments interface (UPI) and RuPay card have reached 65 per cent of the payments done through debit and credit cards.
Jaitley said in 2017-18, the tax returns filed reached 6.86 crore, an increase of 25 per cent over the previous year.
This year, as on October 31, 2018, already 5.99 crore returns have been filed – which is an increase of 54.33% compared to the previous year till this date. As many as 86.35 lakh new filers were added this year.
What Manmohan said?
The senior Congress leader asked the government to not resort to further unorthodox, short-term economic measures that can cause any more uncertainty in the economy.
“Notebandi impacted every single person, regardless of age, gender, religion, occupation or creed,” Singh said.
Beyond the “steep drop” in headline GDP growth numbers after demonetisation, the deeper ramifications of ‘notebandi’ are still unravelling, he said.
Small and medium businesses that are the cornerstone of India’s economy are yet to recover from the demonetisation shock, Singh asserted.
“This has had a direct impact on employment as the economy continues to struggle to create enough new jobs for our youth,” he said, adding that the financial markets are volatile as the liquidity crisis wrought by demonetisation is taking its eventual toll on infrastructure lenders and non-bank financial services firms.
In his strong criticism of demonetisation, he said the full impact of the demonetisation exercise is yet to be understood and experienced.
“With a depreciating currency and rising global oil prices, macro-economic headwinds are also starting to blow now.”
“It is therefore prudent to not resort to further unorthodox, short-term economic measures that can cause any more uncertainty in the economy and financial markets.”
Singh also urged the government to restore certainty and visibility in economic policies.
“Today, is a day to remember how economic misadventures can roil the nation for a long time and understand that economic policy-making should be handled with thought and care,” he said.
The Congress has announced that it will hold a nationwide protest on Friday to mark the second anniversary of demonetisation. It has also demanded that Prime Minister Narendra Modi should apologise to the people for “ruining and wrecking” the economy.
Demonetisation disaster hurt economy severely: Stalin
DMK President MK Stalin and PMK Founder S. Ramadoss on Thursday criticised the Central government for demonetising the Rs 500 and Rs 1,000 rupee notes in 2016.
In a tweet, MK Stalin termed the demonetisation as “one man made disaster for India”.
In his tweet Stalin said: “People were brought on streets with their money declared illegal. Indians stood in endless lines and many died outside banks, millions of jobs were lost, small industries shut and the economy hit irreversibly.”
On the other hand, Ramadoss said the day marks the second anniversary of not only demonetising Rs 500 and Rs 1,000 rupee notes but also of hurting the economy severely.
Reason behind demonetisation still a mystery: Kejriwal
Aam Aadmi Party (AAP) convener and Delhi Chief Minister Arvind Kejriwal questioned the rationale behind the Modi government’s note ban move and termed it as “a self inflicted deep wound” on the Indian economy.
“Though the list of financial scams of Modi govt is endless, demonetisation was a self inflicted deep wound on Indian economy which even two years later remains a mystery why the country was pushed into such a disaster?” he said.
Demonetisation biggest mistake of Modi govt: Chavan
Senior Congress leader Ashok Chavan on Thursday described demonetisation as the “biggest mistake of the Modi government” and claimed that it resulted in the slowdown of the economy and rise in unemployment.
None of the objectives of demonetisation, like eradication of black money, removal of fake notes in circulation and breaking the back of Naxal and terror activities, have been achieved, he said on the second anniversary of note ban.
“Not all cash is black and not all black (money) is cash. Ours is a cash economy and receipts are not available for all transactions. It would be foolish to think that auto-rickshaw drivers, vegetable vendors, small shopkeepers and village markets deal in black money,” Chavan said in a statement.
Stressing on the need for an analysis of demonetisation, the former chief minister of Maharashtra sought to know if the Union cabinet, the chief economic adviser, and the cabinet sub-committee were even aware of the decision.
Centre cheated nation with demonetisation scam: Mamata
Meanwhile, West Bengal chief minister Mamata Banerjee on Thursday slammed the central government under Prime Minister Narendra Modi for cheating the nation with the note-ban “scam”.
Calling it a dark day, Banerjee tweeted: “The government cheated our nation with this big #Demonetisation scam. It ruined the economy and the lives of millions. People will punish those who did this.”
“#DarkDay Today is the second anniversary of #DeMonetisation disaster. From the moment it was announced I said so,” Banerjee wrote on her Twitter handle.
“Renowned economists, common people and all experts now agree,” she said.
Biggest scam in history: CPI(M)
The Communist Party of India-Marxist recalled November 8, 2016, as the “biggest scam in the history of our nation when Modi unleashed destruction by demonetisation of our economy”
CPI(M) General Secretary Sitaram Yechury blamed Modi for destroying “the economy, lives and livelihoods”.
“Modi and his minions claimed demonetisation will end black money, finish corruption, terminate terrorism, and bring only digital transactions. Two years later, Modi is silent. The truth is that he single-handedly destroyed the economy, lives and livelihoods.”
Sharad Yadav attacks Centre
Loktantrik Janata Dal leader Sharad Yadav also attacked the Centre for the rising unemployment.
“Now every citizen has understood that it was not a historical blunder which has ruined every house but it was a decision to benefit only a few capitalists friends of BJP. Virtually this government has inter-alia finished the businesses and increased unemployment,” he tweeted.
(With inputs from agencies)