There should be no doubt now on the success of demonetisation drive, as Finance Minister Arun Jaitley today said the fallout of demonetisation was on predicted lines and the economy will benefit in medium and long term. It is noteworthy that a day after the Reserve Bank said that almost all of the demonetised currency came back into the system, Jaitley said the fact that money got deposited in banks does not mean that all of it is legitimate money.
He said demonetisation, coupled with GST, will give a “significant boost” to direct tax revenues as many people have come under the tax net. Although an overwhelming amount of money was deposited in banks, it is not a concern for the government as it is good for the economy that more money has come into the formal system. It is worth mentioning here that the RBI yesterday said about 99 per cent of Rs 15.44 lakh crore demonetised currency came back into the system.
Against this backdrop, it is apt to mention here that Prime Minister Narendra Modi has added another feather to his cap by delivering a severe jolt to black money hoarders, which is a welcome move. This was a very bold initiative in announcing the withdrawal of Rs.500 and Rs.1000 currency notes from circulation. Hoarders of black money felt the pinch as their wealth dwindled overnight–the huge bundles of higher denomination notes in their possession became worthless papers. It cannot be gainsaid that those who availed of the VDS scheme could consider themselves lucky as they could salvage a part of their ill-gotten earnings by coughing up 30 per cent tax. However, there were issues at execution level in the beginning, which were bound to be there but evaporated after some time. To tame the scourge of black money of such a huge dimension, such drastic steps were required, resulting in some inconvenience to general public but it was justified.
Electioneering by the political parties would suffer, so it is good for the society, as party candidates will have to spend less, which would be beneficial in the long term. Role of money bags and criminals would be eliminated. Elections would become law compliant and transparent. It cannot be gainsaid that the then system forced everyone to access to the banking system in getting replacement of old currency notes on hand. No doubt, there was an initial hiccup in coping with the situation, but it was for the betterment of everyone in the future. The timely release of new currency notes having high security features definitely protected the currency system of the country. However, some analysts of secular brigade vehemently opposed that decision, but now they must have understood that if you need a drastic change in the system, you definitely need some steps like this. No one, not even Modi said that this step will solve the problem of black money and it is quite obvious as well that we cannot solve a hundred-year-old problem by an overnight decision. But this decision has surely improved the system and endeavoured to root out black money, to an extent, from the system. Here comes the second part and that is generation of black money. Reasons have to be identified and plugged in the toughest possible manner.
By Uday India Bureau