ON THE FOURTH anniversary of demonetisation, Prime Minister Narendra Modi Sunday shared data to suggest that the overnight scrapping of Rs 500 and Rs 1,000 notes brought in formalisation and transparency along with a widening of the tax base and curbing of counterfeit currency.
“Demonetisation has helped reduce black money, increase tax compliance and formalisation and given a boost to transparency. These outcomes have been greatly beneficial towards national progress,” Modi said in a tweet.
‘Operation Clean Money’, the Prime Minister said, increased formalisation. “17.92 lakh persons identified for the online verification process in the first phase. 3.04 lakh persons who had deposited cash of 10 lakh or more, but had not filed return till the due date identified. 2.09 lakh such identified non-filers responded & paid self-assessment tax of 6,531 crore. Self-assessment tax of over 13,000 crore was paid by the targeted non-filers,” another tweet of Modi stated.
While a December 2018 NBER (National Bureau of Economic Research) paper authored by Harvard professor Gabriel Chodorow-Reich, Gita Gopinath (now IMF Chief Economist), Prachi Mishra and Abhinav Narayanan estimated a 2 percentage points contraction in the quarter of demonetisation (Oct-Dec 2016), it did point out there may be longer term advantages in tax collections, shift to savings in financial instruments and non-cash payment mechanisms.
Finance Minister Nirmala Sitharaman also cited increase in direct tax collections, income tax returns, and direct tax to GDP ratio as the outcomes from demonetisation. In her tweets, she said direct tax collections increased to Rs 10.5 lakh crore in 2019-20 from Rs 6.95 lakh crore in 2014-15, while direct tax-to -DP ratio increased to 5.98 per cent in 2018 from 5.86 per cent in 2017, and 5.53 per cent in 2016.
Opposition leaders from Congress, however, criticised the government over demonetisation, alleging that the Modi government has continuously changed the explanatory reasons. Demonetisation was aimed at helping a few of the Prime Minister’s “crony capitalist friends” and had “destroyed” the Indian economy, Congress leader Rahul Gandhi said.
The data shared by the Prime Minister said notes in circulation increased to 22.35 lakh crore as on December 2, 2019, from 17.74 lakh crore as on November 2016, it said. “Before demonetisation, the average on-year growth rate of notes in circulation was at 14.51% from October 2014 to October 2016,” it said.
The number of counterfeit notes detected increased to 7.62 lakh in 2016-17 from 6.33 lakh in 2015-16 and 5.94 lakh in 2014-15. The number of counterfeit notes detected has, however, subsequently declined to 0.90 lakh (till September-end ‘20) from 2.97 lakh in 2019-20, 3.17 lakh in 2018-19 and 5.23 lakh in 2017-18, the data showed.
In a video released as part of the party’s online ‘SpeakUpAgainstDeMoDisaster’ campaign, former Finance Minister in UPA P Chidambaram said, “The first lesson every ruler and every government must learn is that – even if you do not do good to the people, do not do harm. The BJP-led NDA government did great harm to India’s economy on November 8th, 2016.”
Rahul Gandhi further said the question is how Bangladesh’s economy “surpassed” the Indian economy as there was a time when India used to be one of the most high performing economies of the world. “The government says that the reason is COVID but if that is the reason, there is COVID in Bangladesh and elsewhere in the world also. The reason is not COVID, the reason is ‘Notebandi’ and GST,” Gandhi said.
The finance minister also shared data on increase in corporate tax returns filed after demonetisation: 9.43 lakh in 2017 from 8.04 lakh in 2016. The corporate tax returns filed increased further to 9.65 lakh in 2018 but then moderated to 9.34 lakh in 2019, the data showed.
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