Finance Minister Arun Jaitley strongly defended the demonetization drive as opposition parties seized the second anniversary of the move to rip into the government and demanded an apology from Prime Minister Narendra Modi by saying ‘prophets of doom’ have been proven wrong as hard data of last two years shows an increase in tax base, greater formalization of the economy as India retaining the fastest growing economy tag for the fifth year in a row.
In a facebook post, the Finance Minister described that Narendra Modi’s overnight ban on higher currency notes on November 8, 2016 was a key step in a chain of important decisions taken by the government to formalize the economy.
He also added in his post that listing an 80 percent jump in income tax return filters from 3.8 crore to 6.86 crore in the four years of the BJP-led government and ‘by the time the first five years of this government are over, we will be close to doubling the assesses base, the minister wrote it in the facebook post captioned it ‘Impact of Demonetization’.
The ‘note ban’ issue helped to increase in digital transactions and more resources being available for poor and for building better infrastructure as the main achievements and a better quality of life for our citizens, he said.
The finance minister also parried massive criticism of the government after Reserve Bank of India’s annual report showed that 99.3 per cent of the banned cash had returned. He stated that an ill-informed criticism of the demonetization is that almost the entire cash money got deposited in the banks. Confiscation of currency was not an objective of demonetization. ‘Getting it into the formal economy and making the holders pay tax was the broader objective’, stated the Finance Minister.
He also emphasized in his post that the system required to be shaken up in order to make India move from cash to digital transaction.
Jaitley, while listing the number of reforms taken by the BJP-led NDA government to fight the black economy, in his post, argued that demonetization resulted in increasing the tax base and a higher tax collection, both in direct and indirect way for the government of India, thereby improving its fiscal health.
Jaitley also mentioned that ‘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. The violators faced action, larger deposits helped the lending capacity of banks and a lot of money was diverted to mutual funds.
In addition, the Visa and Mastercards were losing the market share in India to indigenously developed UPI and RuPay card.
The impact on government’s digital transaction initiative UPI was noticeable as it saw a significant jump after demonetization with transaction growing from Rs. 0.5 billion in 2016 to 598 billion in 2018.
The value of BHIM transactions also went up significantly after demonetization, thereby giving a fillip to government’s efforts to expand the digital payment space.
Jaitley said demonstration along with GST or Goods and Services Tax, had curbed cash transactions in big way. ‘An increase in the digital transactions is visible. This formalization of the economy has led to the tax payer base increase from 6.4 million in the pre-GST regime to 12 million tax payers in the post-GST regime’, concluded the Finance Minister.