November 8, 2017

Demonetisation has moved the nation towards greater formalisation of the economy.

Anti-black money day, gives us an opportunity to reflect on the work done in the last three-and-a-half years to move towards a new India—an India where every citizen has a better quality of life, an India free of corruption, and an India which is recognised as a nation of honest government, honest business and honest politics.

Ever since Prime Minister Narendra Modi came into government at the Centre, he has consistently worked towards these objectives, particularly through efforts to fight corruption and black money, and transform the way the country works: From the setting up of the special investigation team (SIT) against black money in the first Cabinet meeting of this government to various steps like renegotiation of international treaties with Singapore, Mauritius, Switzerland and Cyprus, strengthening the Benami Transaction Act and notifying its rules to start taking action under this act, laws to tackle the menace of money stashed away abroad, strict action against the loan defaulters of the system and zero tolerance against corruption at high places.

Demonetisation of high-denomination currency was among the boldest initiatives ever taken for an economy of the size of India, with no parallel in history. Because of the high proportion of Rs 500 and Rs 1,000 notes, which were growing every year by leaps and bounds since 2004, nearly 86% of currency in circulation comprised high-value notes. Of these, nearly one-third amounting to Rs 6 lakh crore was held in currency which was never in the banking system for long periods of time,leading one to believe that it was illegitimate money hoarded or used for illicit transactions, possibly also for terror funding.

This bold transformational initiative showed the sense of urgency and commitment of a decisive leadership to take bold action against corruption, black money, terror financing and counterfeit currency. Clearly, the move has been highly successful and has moved the nation towards greater formalisation of the economy.

Nearly 5 million bank accounts of workers were opened post November 8, 2016, ensuring that they get minimum wages, which were increased by an unprecedented 42% by the government last year. Over 10 million additional employees are enrolled under the provident fund, giving social sector benefits to their families. Over 13 million workers have been registered under Employees’ State Insurance (ESIC), and the employees as well as their families are enjoying the health benefits as a direct outcome of the formalisation of their engagement, which was hitherto never reported.

More and more taxpayers are being added to the system and digital payments have risen sharply since demonetisation, registering unprecedented in the post demonetisation period. The Bharat Interface for Money (BHIM) mobile app has the potential to transform the way payments are made, enabling the common man to be connected with the digital world, with his mobile phone becoming his bank.

Because of larger availability of low-cost deposits in banks, lending rates are on the decline with housing loans available at as low an interest rate as 8.3% per annum. The revenues of urban local bodies have also shot up post-demonetisation and financial savings of households have also started increasing after many years. It is a matter of great satisfaction that most of the money has now been deposited in the banking system. This money now has an identity, a name and address which brings accountability to all the depositors.

Some opponents of demonetisation are unable to fathom the basic principle that with this accountability not only will the money deposited in the bank have to be explained but also other transactions in such accounts, which will then become taxable, generating greater revenues for the government to serve the welfare initiatives for the poor of India. Deposits worth nearly Rs 3.68 lakh crore in around 2.2 million bank accounts are currently under scrutiny. Nearly 224,000 shell companies have been struck off from the registrar of companies, plugging avenues for escaping the tax net and opening up transactions for scrutiny.

The people of India recognise the initiatives taken by Prime Minister Modi and have consistently supported these measures against corruption and black money. Election after election have shown the people’s trust in the leadership of the Bharatiya Janata Party (BJP) and the confidence in the prime minister’s ability to transform India.

Coupled with the goods and services tax (GST) and other measures taken to bring all business and trade within the ambit of taxation, one can clearly see India moving into a new growth trajectory. Honest payment of taxes on a wider tax base will enable tax rates to moderate, bring down inflation further and make India an attractive destination for investment, leading to more and more working opportunities for the youth of our country, encouraging entrepreneurship, and making India stand tall in the comity of nations for its ease of doing business in a corruption-free environment.


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