Mounting a powerful defence of the demonetisation measure designed to curb black money, Finance Minister Arun Jaitley on Tuesday said that as a disruptor of the status quo ante the note ban, along with other measures taken, has set in motion a process of changing the manner in which India spends money. “If you look back at all the steps we have taken in the last three-to-four years, besides demonetisation, we have succeeded in bringing centre-stage the whole issue of how financial transactions in India ought to be carried out,” Arun Jaitley said addressing the India Today Conclave Next here.
“The question before us was do we continue with the status quo ante of a high cash dominated society with all its aberrations,” he said, adding that the situation was untenable for the fastest growing big economy that aspires to “sit at the high table with developed nation.” The choice staring at the face was whether “we allow the status quo to continue or set in motion a process guided by the belief that an aspirational nation has to change.”
Pointing to the normal practice of purchasing real estate by partly paying in cash, or of companies having dual bank accounts to evade tax, the Finance Minister noted that various related measures taken had the triple objective of cutting cash use, increase the country’s tax base and the number of digital transactions.
“You have to see it (demonetisation) together with the spending curbs imposed on cash, the thrust on income disclosures, the thrust against benami properties,” he said. “Taking all this, there’s going to be a sea change in the manner in which India spends money,” he added. Describing the move against black money as an ongoing process, Jaitley described the fact that most of the banned currency had returned to the system as a success for demonetisation.
“Cash outside the system can be laundered, but once deposited it lacks anonymity..it is in an account, which has a holder with a name and the money can be taxed,” he said. On the note ban impact on the GDP and on the Indian informal and small scale sector that contributes nearly half the national income, Arun Jaitley said this was the transitory effect of “two back-to-back reforms including GST.”
“Is the setback for one or two quarters too much price to pay? Do we forego structural reforms for that,” he asked.