The latest figures released by the Reserve Bank of India clearly show that Prime Minister Narendra Modi’s historic and bold decision — demonetisation — was in the national interest and in the interest of the common man. The decision, which was aimed at checking black money and strengthening our economy, has already started bearing fruit.
Unfortunately, Opposition parties have conveniently ignored these positive outcomes and have criticised the move which is being seen as an economic revolution the world over. Demonetisation was painted as a problem for the common man and an immature decision by the government. A former finance minister was crying foul over the move when, at the same time, his son was appearing before the CBI in a fraud case.
RBI figures show that lakhs of fraud transactions are already under scrutiny. Over three lakh shell companies have been unearthed and 2.1 lakh companies have been deregistered due to irregularities. As many as 1,150 companies involved in money laundering have been caught and Rs 13,300 crore has been recovered.
With demonetisation, the dream of a cashless economy is being realised. The RBI, by collecting 99 per cent of the Rs 500 and Rs 1,000 notes made defunct on November 8, 2016, amounting to about Rs 15.28 lakh crore, effectively responded to the challenge. The common man of India too stood firmly with the prime minister. By standing in long queues and waiting for hours outside banks, Indians showed their acceptance towards Narendra Modi’s decision.
The latest RBI figures show that the government has not only been successful in flushing out black money but also eliminating funding for terrorism in Kashmir and Naxalism in affected areas. Another major impact of demonetisation has been the elimination of fake Indian currency notes which were used to fund terror and weaken our economy.
Demonetisation had important multi-pronged objectives. The move has led to the conversion of the non-formal economy into a formal economy, thus expanding the tax base and making funds available for social and development projects. But its major impact has been felt in the way Indians have adopted a cashless mode of transactions, giving a big boost to digitalisation. From 71.27 crore digital transactions in October 2016, this figure has gone up to 111.45 crore in May 2017. Experts say that by 2020 digital payments in India will touch $500 billion. Imagine the kind of positive impact such a development will have on our economy.
Demonetisation has also led to a crackdown on tax defaulters. So far, dubious transactions worth over Rs 1.7 lakh crore have been caught, showing how a parallel black economy was thriving due to the indecision of previous governments. In 2016-17, a total of 3.61 lakh complaints related to suspicious transactions were registered against 61,000 complaints in 2015-16, proving how effective the government was in dealing with tax fraud. Post demonetisation, tax authorities have seized undisclosed income worth over Rs 15,497 crore, a remarkable jump of 38 per cent.
A significant portion of Specified Bank Notes (SBNs) deposited could possibly represent black money. Accordingly, Operation Clean Money was launched on January 31, under which scrutiny of about 18 lakh suspicious accounts was initiated, a first in India’s history. All this has been possible because the Modi government showed the political will to cleanse the system.
In yet another first, there is a substantial increase in the number of income tax returns filed after demonetisation. While ITRs have increased by 34 per cent, advance tax collections of personal income tax (other than corporate tax) has shown a remarkable jump of over 42 per cent.
The demonetisation drive also led to a change in saving habits and the formalisation of the assets market. Considerably more funds came into the organised financial markets. For example, the total assets under management (AUM) of mutual funds rose by 54 per cent by the end of June 2017 from March 2016.
By August 4, the RBI had ensured liquidity of Rs 10.5 lakh crore in our banking system as compared to Rs 5.2 lakh crore a year ago, which has resulted in banks reducing interest rates. The beneficiaries have been people who have taken loans and are paying lower EMIs.
The impressive revenue collection under GST is also partially attributable to the demonetisation drive. The total revenue of GST remitted up to August 29, is Rs 92,283 crore, that too with only 64.42 per cent of assessees having completed their payments. Almost 19 lakh new taxpayers have registered with the GSTN.
Belying the critics of demonetisation, the Modi government has been able to steer the Indian economy towards a new growth path. Demonetisation and the introduction of GST have been recorded as watershed moments in India’s history, where a strong prime minister made bold moves towards a New India. With demonetisation’s short-term effects having played out completely, it is its long-term positive impact that will make the Indian economy stronger and ensure the well-being of its people.