New Delhi: Finance Minister Arun Jaitley on Sunday said the Modi government’s demonetisation decision is intended to create a “new normal”, and despite short-term inconvieniences, it would change the spending pattern of Indians for the better.
Analysing the rationale behind the decision in a seven-point Facebook post titled ‘Demonetisation — A look back at the last two months’, Jaitley said the “Modi Government had absolute clarity from day one that it would move against the shadow economy and black money… The demonetisation of high denominational currency notes was the big step in the same direction.”
He added that the “the period of pain and inconveniences is getting over and the economic activity is being restored.”
“When 86 per cent of a country’s currency, constituting 12.2 per cent of its GDP, is squeezed out of the market and sought to be replaced by a new currency, there would obviously be significant consequences of that decision,” he said, adding that the queues outside the banks have disappeared and remonetisation has moved ahead.
“India continues to suffer being a hugely tax non-compliant society. Expenditure required for poverty eradication, national security and economic development have to be compromised with on account of tax non-compliances… Tax evasion has been considered as neither unethical nor immoral… Several Governments have allowed this “normal” to continue…” Jaitley said. “The demonetisation puts a premium on honesty and penalises dishonest conduct.”
The Finance Minister further said demonetisation required both courage and stamina. “The implementation of the decision carried pain. It can lead to short-term criticism and inconveniences. 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 denominational currency has been deposited with the banks does not render this money to be legitimate cash. Black money does not change its colour merely because it is deposited in bank. On the contrary, it loses its anonymity and can now be identified with its owner,” he said.
The comments follow reports about an estimated 97 per cent of junked notes getting deposited in bank accounts, thus casting doubts on the effectiveness of demonetisation move in checking the black money menace.
The Revenue Department, he said, would be entitled to tax this money. “In any case, the amendment to the Income Tax Act itself provides that the said money, if voluntarily declared or if involuntarily detected, would be liable for differential and high rates of taxation and penalty,” he said.
Taking on the Opposition, Jaitley said, “There was no social unrest while implementing such a major decision… The opposition disrupted a full Session of Parliament… It is a tragedy that a national party like the Congress decided to adopt a political position, opposing both technology, change and reforms. It sided with black money friendly status quo.”
“The difference between Prime Minister Narendra Modi and Rahul Gandhi was clear — the Prime Minister was thinking of the next generation while Rahul Gandhi was only looking at how to disrupt the next Session of Parliament,” Jaitley said.