Demonetisation was not designed to only fight the black money menace in India, said Finance Minister Arun Jaitley in response to Reserve Bank of India data suggesting the note ban exercise failed to fight black money.
More taxpayers, a bigger tax base, more digitisation, lesser cash in the system, integration of the formal and informal economy – these were the principal objectives of demonetisation, said Jaitley in a media conference on Wednesday evening.
Jaitley’s comments come after the RBI published its annual report for fiscal 2016-17. The report indicates that all but 1 percent of the demonetised currency has returned to the banking system via deposits. This has raised doubts about whether the demonetisation of Rs 500 and Rs 1,000 denomenation notes in November 2016 at all succeeded in eliminating black money.
Former Finance Minister P Chidambaram, a leader of the Indian National Congress party, criticised the demonetisation process afresh based on this RBI data.
Countering such criticism Jaitley said, “it is unfortunate that those who have never fought against black money tried to confuse the object of demonetisation with how much currency is returned”.
While those in power earlier did not take any step against black money, they are now confusing demonetisation with currency that has come back into the system.Arun Jaitley
Jaitley said his government’s purpose for undertaking demonetisation was as an exercise to nudge India towards digitisation, reduce cash-based transactions, expand the tax base and end black money. “We do believe that in each of these areas the effect of demonetisation has been extremely positive.”
Jaitley also mentioned the effort to eliminate fake currency, pointing out that the RBI has for the first time last fiscal undertaken such an exercise to detect fake currency.
The finance minister stated that demonetisation was only one effort undertaken by his government to fight black money, while listing some of the others:
- The program to ensure every Indian has a bank account
- The government’s decision to send all subsidy money directly to bank accounts
- To curb roundtripping through treaty misuse
- Take action against benami and shell companies
- To link the PAN card to high-value cash expenditure
- To incentivise official transactions via GST
“My next step is going to be to put an end to black money used in elections,” Jaitley added.
(The article was originally published on BloombergQuint)
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