New Delhi: Union Finance Minister Arun Jaitley marked the second anniversary of demonetisation with his latest blog on Thursday, saying the motive behind banning old Rs 500 and Rs 1,000 currency notes was to formalise the economy and not confiscate cash.
“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. Getting it into the formal economy and making the holders pay tax was the broader objective,” wrote Jaitley.
As many as 99.3 percent of the old Rs 500 and 1,000 notes, that were banned overnight in November 2016, were returned, the Reserve Bank of India (RBI) had said in its latest annual report. Of the Rs 15.41 lakh crore worth of Rs 500 and Rs 1,000 notes in circulation before November 8, 2016, notes worth Rs 15.31 lakh crore were returned.
“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 wrote in favour of demonetisation.
Taking sides with the move, the finance minister said it went on to become a key step in a chain of important decisions taken by the government to formalise the economy.
“The government first targeted the black money outside India. Asset holders were asked to bring this money back on payment of penal tax. Those who failed to do so are being prosecuted under the Black Money Act. Details of all accounts and assets abroad which have reached the Government, resulted in action against the violators,” wrote Jaitley.
Broadening the tax base and, thus, fostering financial inclusion was, Jaitley stated, another important step to ensure that even weaker sections became part of the formal economy.
“Jan Dhan Accounts have resulted in most people being connected to the banking system. The Aadhaar Law has ensured that Direct Benefit Transfer of Government support system reached directly into the bank accounts. It is now becoming increasingly difficult to evade the tax system,” added Jaitley in his blog.
In November, 2016, Prime Minister Narendra Modi scrapped high value Rs 1,000 and Rs 500 notes, with the larger motive to fight black money, terror financing and weed out counterfeit currency from India. After demonetisation, Rs 500 notes were reintroduced, Rs 1,000 notes were scrapped and brand new Rs 2,000 notes were introduced.