Finance Minister Arun Jaitley has said demonetization was a key step in a chain of important decisions taken by the government to formalize the economy. He said financial inclusion was another important step to ensure that even weaker sections became part of the formal economy.
In a Facebook post today on the completion of the two years of demonetization, Mr Jaitley said the government first targeted the black money outside India and Asset holders were asked to bring the money back on payment of penal tax.
Stating that India was a cash-dominated economy, the Minister said demonetizations compelled holders of cash to deposit the same in the banks. He said the enormity of cash deposited and identified with the owner, resulted in 17 lakh 42 thousand suspected account holders from whom the response has been received online through non-invasive method. He said, a lot of money was diverted to the Mutual Funds for further investments, which became a part of the formal system.
Stating that an ill-informed criticism of the demonetization was that almost the entire cash money got deposited in the banks, the Finance Ministry said the confiscation of currency was not an objective of demonetization. Mr Jaitley said getting that money into the formal economy and making the holders pay tax, was the broader objective.
The Finance Minister said Demonetization and implementation of GST curbed cash transactions in a big way. This formalization of the economy has led to the taxpayer base increase from 64 lakh in the pre-GST regime to one crore 20 lakh taxpayers in the post- GST regime.
The Minister said the impact of demonetization has been felt on the collection of personal income tax. Its collections were higher in Financial Year 2018-19 till 31st of October 2018 compared to the previous year by over 20 per cent. He said even in the Corporate Tax, the tax collections are over 19 per cent higher. Mr Jaitley said in 2017-18, the tax returns filed reached six crores 86 lakh, an increase of 25 per cent over the previous year.
The Finance Minister said the government has used the resources for better infrastructure creation, social sector and for rural India. He said the 7th Pay Commission was implemented within weeks and the One Rank-One Pension was implemented.
Former Prime Minister Dr Manmohan Singh today said that the demonetization impacted every single person, regardless of age, gender, religion, occupation or creed. In a statement, he said, small and medium businesses that are the cornerstone of India’s economy are yet to recover from the demonetization shock.
This has had a direct impact on employment as the economy continues to struggle to create enough new jobs for the youth.
Dr Singh said the financial markets are volatile as the liquidity crisis wrought by demonetization is taking its eventual toll on infrastructure lenders and non-bank financial services firms. He urged the government to restore certainty and visibility in economic policies.