Note ban aim was to formalise economy, says Jaitley

Note ban aim was to formalise economy, says Jaitley

Agency News

New Delhi, Nov 8: Finance Minister Arun Jaitley on Thursday defended the note ban exercise undertaken by the government two years ago and said the real purpose of demonetisation was not the confiscation of cash but to bring it to the formal economy and make the holders pay tax.

"Confiscation of currency was not an objective of Demonetisation. Getting it into the formal economy and making the holders pay tax was the broader objective," Jaitley said on the second anniversary of demonetisation.

He said the criticism of the demonetisation that almost the entire cash money got deposited in the banks was "ill-iformed."

"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."

In a Facebook post, the finance minister described Prime Minister Narendra Modi's announcement of the ban on higher currency notes on November 8, 2016, as a "key step in a chain of important decisions taken by the government to formalize the economy".

"Financial inclusion was another important step to ensure that even weaker sections became part of the formal economy."

Economic Affairs Secretary Subhas Chandra Garg also came out in defence of demonetisation saying it was a structural reform.

"Demonetisation and GST reflect long term vision of the Government and its ability to undertake massive structural reforms. Tax filers under both Direct and Indirect taxes are close to getting doubled. Digital payments have risen sharply & become common place. Fake notes are out," Garg said in a Tweeter post.

Jaitley's strong defence of demonetisation came amidst a barrage of criticism by opposition parties which ripped into the government and demanded an apology from Prime Minister Narendra Modi.

"It is often said that time is a great healer. But unfortunately, in the case of demonetisation, the scars and wounds of demonetisation are only getting more visible with time. The havoc that it unleashed on the Indian economy and society is now evident to everyone. Notebandi impacted every single person, regardless of age, gender, religion, occupation or creed," former prime minister Manmohan Singh said in a statement.

"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," said Singh and urged the government to "restore certainty and visibility" in economic policies.

The Congress party also launched a Twitter campaign to protest against the note ban exercise.

West Bengal Chief Minister Mamata Banerjee referred to November 8, 2016 as a 'Dark Day'.

"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," tweeted the Trinamool Congress supremo.

CPI(M) General Secretary Sitaram Yechury also slammed the government and said, "Modi & 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. #DemonetisationDisaster (sic)".

Delhi CM and Aam Aadmi Party (AAP) chief Arvind Kejriwal wrote on Twitter, "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?"

On November 8, 2016, Prime Minister Modi in a prime time address announced that the old Rs 500 and Rs 1,000 would no longer be valid from midnight that day.

He said the decision was being taken to wipe out black money and combat terror financing.

In the two years since, the demonetisation decision has come under wide criticism from economists who say the exercise has failed to achieve its goals.

Former Reserve Bank of India governor Raghuram Rajan has said he had made it quite clear to the government that the demonetisation was "not a good idea" and that its implementation was "not well-planned" since 87.5 per cent of the currency was being demonetised.

The International Monetary Fund's newly-appointed chief economist, Gita Gopinath, also held the same view.

“I don’t think I know a single macro economist who thinks that this was a good idea. And, it’s not something I think should be done for a country such as India and the level of development it has,” Gopinath said in a published interview last year.

Nobel laureate Amartya Sen termed note note ban as an unguided "missile" fired "unilaterally" by the government without adhering to the democratic conventions.

Bibek Debroy, chairman of the Economic Advisory Council to Prime Minister (EAC-PM), however, said

demonetisation should not be seen through a narrow cost-benefit calculus but as a move aimed at "institutional cleansing". (UNI)