Finance Minister Arun Jaitley on Thursday strongly defended the centre’s demonetisation decision two years ago, asserting that the system needed to be shaken to make India move from cash to digital transactions. “An ill-informed criticism of the demonetisation is that almost the entire cash money got deposited in the banks. Confiscation of currency was not an objective of demonetisation,” Jaitley said in a blog post that coincides with nationwide protests planned by the Congress on the second anniversary of the notes ban.
Prime Minister Narendra Modi had announced the sudden decision to cancel Rs 500 and Rs 1,000 currency notes on November 8 two years ago. The move sucked out 86 per cent of currency notes, leading to a huge cash crunch in the economy for months.
Jaitley said getting the money into the formal economy and making the holders pay tax was the broader objective of the notes ban decision.
There were 3.8 crore filers of income tax returns when the NDA government came to power in May 2014.
“In the first four years of this Government, it has increased to 6.86 crore,” he said. “By the time the first five years of this Government are over, we will be close to doubling the (tax) assessee base,” he said, attributing the sharp increase to the notes ban decision.
“Despite an annual income tax relief of Rs. 97,000 Crore given to the smaller tax payers and a Rs. 80,000 Crore relief given to the GST assesses, tax collections have gone up. Rates of taxes, both direct and indirect have been reduced, but tax collections have gone up. The tax base has been expanded. GST rates on 334 commodities which were paying an effective 31% tax pre-GST have witnessed a tax reduction,” he wrote.
The government, he stressed, has used these resources for better infrastructure creation, social sector and rural India.
“More formalisation, more revenue, more resources for the poor, better Infrastructure, and a better quality of life for our citizens,” he said.
Independent analysis of the data over the last years has led indicated that the decision did help formalise the economy but there are many indicators that small businesses did get hit.