Terming the Union government’s note ban as a colossal failure, economist Prabhat Patnaik, here on Sunday, said the move had left a permanent impact on the country’s economy.
He was delivering a special lecture on note ban and Goods and Services Tax at a State-level seminar organised by the trade unions affiliated to the Centre of Indian Trade Unions.
The note ban was a colossal failure considering the objectives with which the government executed it. “Hardships caused by the note ban are not temporary. The first objective before the note ban, as per the government, was attacking black money. Earlier, it was estimated that more than ₹3.5 lakh crore of black money would not return to the economy. But, 99% of the demonetised currency returned to the system, failing the purpose,” he said.
Similarly, Prof. Patnaik said the second objective was to put an end to counterfeit currency. As per the estimation of Indian Statistical Institute, around ₹400 crore counterfeit currency was in circulation in the country. “It was hardly 0.25% of the total currency in circulation. If demonetisation was to counter counterfeit currency, it is like using a tank to kill a mosquito. There were many other better ways to curb circulation of counterfeit currency,” he said.
The third objective, Mr. Patnaik said, was to promote cashless transactions. “Soon after demonetisation, people started using other modes for transactions. However, that warranted extra charges, a burden on the public. Forcing the public to go for cashless transactions was an authoritarian measure. Over the days, as the currency started flowing in, people resumed cash transactions,” he said.
Commenting on the Goods and Services Tax, he said the new tax system had also affected the petty production sector. Several products, which did not attract tax in the earlier system, had been brought under the tax network. Similarly, those products under low tax category had been included in the higher tax category. “Makers of Banarasi silk saris are suffering the heat of GST,” he said. Further, he said that the new tax system had been an attack on the basic structure of the Constitution. “Earlier, the State government had rights to enhance their revenue by revising sales tax. With the new system in place, States have lost the power and this development is the sign of fascist rule,” he said.
