Prime Minister Narendra Modi is thinking of the next generation, while Congress vice-president Rahul Gandhi is only looking at how to disrupt the next session of Parliament, Union Finance Minister Arun Jaitley said on Sunday in a blog on two months of demonetisation.
While the Prime Minister is now speaking of cleaning the political funding systems, his opponents want a “cash-dominated, cash-generating and cash-exchange system to continue”, he said adding that the pain and inconvenience caused by demonetisation are now receding.
“Now that the queues outside the banks have disappeared and the remonetisation has moved ahead, it would be worthwhile to analyse the rationale behind the decision and its impact … Economic activity is being restored,” Mr. Jaitley said adding that banks now had more money to lend and interest rates had come down.
Calling the government’s demonetisation decision an obviously disruptive reform that would change India’s “retrograde status quo” of cash transactions and tax evasion compromising expenditure for poverty eradication, national security and economic development, Mr. Jaitley admitted that its implementation carried pain and could lead to “short- term criticism and inconvenience”.
Transient impact
“Drop in economic activity on account of the currency squeeze during the remonetisation period would have a transient impact on the economy… The fact that large quantum of high-denomination currency has been deposited with the banks does not render this money to be legitimate cash,” he said explaining that this money can now be identified with its owner and taxed as opposed to the earlier situation when paper currency served as “a zero interest anonymous bearer bond” with no history attached to it.
Emphasising that there was no social unrest while implementing such a major decision, Mr. Jaitley said, “All opinion polls conducted by independent media organisations have shown that an overwhelmingly large percentage of people have supported the government’s decision. The Opposition disrupted a full session of Parliament. Their protests have been ineffective. Their exaggerated claims on the disruption of the economy have proved wrong.”
“It is a tragedy that a national party like the Congress decided to adopt a political position, opposing both technology, change and reforms,” he said.
Highlighting that only 3.7 crore tax assessees filed income tax returns in 2015-16, he said that nearly three crore reported an income of less than ₹5 lakh a year and only 24 lakh declared an income above ₹10 lakh a year.
“No better evidence is required to substantiate that both in the matter of direct and indirect taxes, India continues to suffer being a hugely tax non-compliant society,” Mr. Jaitley said.
“Reducing cash may not eliminate crime and terrorism but it can inflict a serious blow to them. The States have shown that the stores of cash do not disappear on their own till governments take active steps to reduce the quantum of paper currency,” Mr. Jaitley wrote.
“The Prime Minister’s decision is intended to create a new ‘normal’,” he added.
“It seeks to change the expenditure pattern of India and Indians. The demonetisation puts a premium on honesty and penalises dishonest conduct.”
