Defending the government’s move of withdrawal of high-denomination currency notes, Finance Minister Arun Jaitley on Wednesday said the “seven-decade old normal” that existed in society had been “disrupted” — which was needed for the country to move towards a “new normal”. He said Prime Minister Narendra Modi had the “broad shoulders to face the consequences of this decision”, which has caused some “pain in transition” but also put India on the cusp of major change.
“The currency issue, I think, should be looked at from the long-term impact that it is going to have on the Indian economy. Now here are we as an economy who is being referred to the world as a bright spot or being in the sweet spot, here are we being referred to as the fastest growing economy in the world…few years from now we hope to evolve from a developing economic economy into a developed economy. We, of course, have our own developmental challenges,” Jaitley said at a Petrotech event.
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“But over the last 70 years, an extremely comfortable relationship between policy planners, businesses, trade and even a large section of us citizens, myself included, has developed…What was the normal Indian life, that if I had to buy property, the two components of payments would be discussed. In a wholesaler-retailer relationship, the two components of payments will be discussed. And this has almost become the normal and for a government to try and disturb this normal, obviously, is disruptionist. For governments, for Prime Ministers to just look the other way was also the normal,”
He said such a normal had to disrupted for India to grow. “And, therefore, this situation which has continued for almost seven decades, could have continued indefinitely. But this so called seven-decade normal had to be disrupted, and it had to be disrupted because a normal for any society can’t be this normal which existed. And, therefore, the Prime Minister had the broad shoulders to face the consequences of this decision. And a decision of this kind carries a pain in transition, which is regrettable, but which was also factored in. But in the process, you find that today the phase we are passing through, we are at a major cusp of change in history,” he said.
There is shortage of the new currency but this had to be substituted through digital means, he said. The currency move will lead to a cleaner economy and better GDP growth in the long run as banks will have more funds to lend. Since November 10, Rs 11.55 lakh crore in form of old 500 and 1,000 rupee notes have returned into the banking system.
“In these 2/3 months, India will move digital. We will achieve far more than what we have achieved in the past few decades. What we will end up achieving is to lay down this new normal,” he said. Jaitley said the long-term advantage of this new normal is more money would come into the banking system, capacity of banks to support the economy will go up and low-cost funds would be available with banks.
Addressing domestic and global investors in the petrochemical industry, he said that the Indian economy, in the long term, is headed for a “very major major change” and policy makers in India do not shy away even from taking a very difficult decisions.
“When you are in a cusp of history and you look at the long-term impact of these steps which are going to be taken, I think India is going is become a society in the long term with a certainly better GDP, a cleaner ethics, a cleaner economy,” Jaitley said.
On the Goods and Services Tax, Jaitley said he hopes all issues will be resolved for this tax reform to be implemented on time.
“Most of the issues as far as the Goods and Services Tax has been concerned have been sorted out. There is the final drafts of the legislations are being discussed. The drafting officers have been trying to work out a consensus on those drafts, one major issue pending…” is the issue of cross empowerment between Centre and the states, he said.
“We are hoping that all (issues) will be resolved and we will be able to implement in on time.” he said.