The Reserve Bank of India (RBI) would complete the process of remonetisation “very soon”, finance minister Arun Jaitley said on Saturday. A “reduced cash currency” would remain, but it would be supplemented by digital means, Jaitley said.
“This (digital) transformation has to be carried to its logical conclusion. The whole process of remonetisation is not going to take very long time, and I’m sure very soon, the RBI, by injecting currency daily into the banking and postal system, will be able to complete that,” Jaitley said at the annual general meeting (AGM) of Ficci.
“One of the efforts of this whole exercise has to be that even though a reduced cash currency would remain, a conscious effort will have to be made in order to supplement the rest with a digital currency,” the minister said.
“And, the manner it (digital currency) has taken (off) in the last five weeks is indeed commendable. Only a section of Parliament seems unaware of what is happening.”
Digital transactions had grown exponentially since November 8, with over 75 crore debit and credit cards in the market, Jaitley said.
The government’s demonetisation and digitisation exercise would create a new normal in the Indian economy that would replace the “unacceptable” system prevalent over the last 70 years, Jaitley said. He was referring to the practice of citizens using ‘white and black’ components in a variety of transactions as the old ‘normal’.
The minister said the downsides of a cash-heavy economy were tax non-compliance, escaping the tax net, and use of cash for illegal purposes. “The government took a somewhat courageous step and went in for large currency swap. The fact that India today has the capacity to take these decisions and capacity to enforce them, to experiment boldly even at a time when the world is looking more inwards, marks an exception as far as India is concerned,” Jaitley said.
Speaking at ET Awards in Mumbai, while defending demonetisation of high value notes, Jaitley said: “Altering this normal is extremely disruptive but in the long run, you will have a higher GDP (gross domestic product), a higher revenue and probably far cleaner economy and far cleaner public life.”
The finance ministry plans to inject at least 50 per cent worth of new currency to replace the old notes of Rs 500 and Rs 1,000 that would be deposited in the banking system by December 30, Economic Affairs Secretary Shaktikanta Das had said on Thursday.
The Reserve Bank of India (RBI) has already supplied over Rs 5 lakh crore worth of currency so far, and the government expects the situation to improve, with the focus now shifting on supplying more of the Rs 500 notes, Das had said. According to RBI data, over Rs 12.44 lakh crore worth of scrapped Rs 500 and Rs 1,000 notes had been deposited till December 10.
Jaitley on Saturday also clarified that “political parties have not been granted any exemption after demonetisation and introduction of the Taxation Laws (Second Amendment) Act, 2016”. He said that the income and donations of political parties “fall in the purview of Section 13A of the Income Tax Act”, and “there is no change in its provisions”. Noting that “in this era of instant outrage, a 35-year-old law is presented as a new law being passed by the NDA (National Democratic Alliance) government”, he said: “I implore all journalist friends to be fully outraged against any step of the government, if it is not against corruption. But, in equal measure, I would also implore them to do adequate research before jumping the gun.”
“After demonetisation, no political party can accept donations in 500 and 1,000 rupee notes,” he said, adding that “any party doing so would be in violation of law”. Political parties “enjoy no immunity whatsoever,” he said, emphasising that “there is no question of sparing anyone, and the political class is no exception”.
Meanwhile, finance ministry on Saturday issued a statement saying political parties do not enjoy “any immunity” and are liable to be questioned like anyone else by the tax authorities.
Revenue secretary Hasmukh Adhia clarified that political parties cannot accept old Rs 500 and Rs 1,000 notes as donations as both these bills have ceased to be legal tenders. “All reports on the alleged privilege to political parties are false & misleading. Political parties have not been granted any exemption or privilege, post demonetisation & introduction of Taxation Amendment Act, 2016,” Adhia tweeted. (With PTI inputs)