Jaitly Defends Demonatisation By Saying That It Formalised Indian Economy

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New Delhi: Union finance minister Arun Jaitley rose to the defence of the National Democratic Alliance (NDA) government on the second anniversary of the invalidation of high-value currency notes in the face of criticism unleashed by Opposition leaders. If former prime minister Mahmohan Singh said the scars on the economy were becoming more visible then Congress president Rahul Gandhi called it a “day of infamy.”

Jaitley, in a blog post, wrote that the ban on old Rs 500 and Rs 1,000 notes was needed to shake up the system and move India from cash to digital transactions. “An ill-informed criticism of 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 the post that coincides with protests planned by the Congress to mark the anniversary.

Late in evening on November 8, 2016, Prime Minister Narendra Modi announced that old Rs 500 and Rs 1,000 banknotes would cease to be legal tender from midnight the same day, rendering worthless 86% of the currency in circulation by value.

The move, aimed at unearthing untaxed income, weeding out fake currency and curbing terrorist finance, led to a cash crunch that lasted months and hit small businesses hard.

Jaitley said moving money into the formal economy and making the holders pay tax was the broader objective of the note ban, noting that the number of income tax return filers had increased from 38 million when the NDA came to power in May 2014 to 68.6 million four years later.

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 note ban. “Despite an annual income tax relief of ~97,000 crore given to the smaller tax payers and a Rs 80,000 crore relief given to the GST (goods and services tax) assesses, tax collections have gone up.

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