November 23, 2016

Demonetisation will help lower the burden on honest taxpayers, and free India from black money and corruption.

Demonetisation will help lower the burden on honest taxpayers and extract more from the dishonest, said Union Minister Piyush Goyal . In an interview with Himangshu Watts , he also said people queuing up at ATMs should realise electronic money transfer is the way forward. Edited excerpts:

Is demonetisation an opportunity?
It’s a huge opportunity to prepare India to offer its people a better quality of life, an opportunity to rid the country of black money, corruption, terrorism and drug financing through fake currency. It’s an impactful measure to bring down the use of cash, encourage people to use the banking system.

What will be the impact?
As India becomes more tax-compliant, government revenues will improve and we will be able to serve the poor better. We can have better roads, healthcare, education and improve the life of farmers. As the country moves towards banking transactions, taxes can be collected more efficiently and effectively, which will help bring down tax rates. Inflation can be brought under control, because cash is used for hoarding also. If inflation is brought down, interest rates will fall. Once rates fall, we have the opportunity to, maybe, achieve the goal of ‘housing for all’ faster; take roads, infrastructure to India’s interiors.

How has the banking system responded to the task?
I don’t see any parallel (of such an operation) in the world… (with) such large amounts of currency to be moved through a country of the size of India. There are two lakh ATMs to be recalibrated. Each takes 3-4 hours. It’s a task of unparalleled scale which India has successfully achieved. What gains can people expect? There will be 100% gains. The finance minister and the Prime Minister will let the nation know.

How does the unreturned currency flow to the government?
Let’s cross that bridge when we get to it. But very clearly, whatever doesn’t come back (is) extinguished liability for the RBI.

Will it be used for social welfare?
There are two streams of benefits. One, there is more honesty in the system and it becomes more difficult to become dishonest. The corrupt are fearful that this government means business. More taxes mean more money to spend for public welfare. Also, the black money that comes out ensures funds to serve the people.

How exactly do people benefit?
It means the dishonest will have to pay more tax. For the honest, there will be less tax. Less tax from the honest and more tax from the dishonest.

Will tax rates fall?
That is for the finance minister to say.

How will demonetisation change elections?
All parties should welcome it. One big source of funding for a cadrebased party like BJP is to take donations from workers and supporters. The other is larger donations above Rs 20,000, which are also easier to collect, and where donors, or corporates, also show sensitivity towards clean politics. As more people start approaching donors for clean money, it will help clean up the political process.

Will the election atmosphere be different?
I’m sure corrupt practices will come down. There are rumours that some parties and leaders take money to give seats to candidates.

What about political opposition?
Today, we have the Communists and Mamata Banerjee attacking us. I’d like to ask them to answer to the poor —labourers in tea gardens, coffee plantations, and contract workers — who are paid in cash. What is their interest that those people should be paid in cash, not cheque? Is it not a fact that contractors don’t even pay minimum wages? We’ve increased minimum wages by 42%. We’re not confident that contractors pass it on to the poor. Very often, they take thumb impression or signature on blank paper.

Trade has been disrupted.
There is a short-term disruption. We’re monitoring the situation and will make sure that inconvenience is tackled quickly.

What is your strategy for digital payments?
People should realise they can comfortably transact in daily life without cash. We are getting reports that even hawkers are installing e-wallets in their mobiles. India should leverage the huge opportunity today to bypass and leapfrog the debit and credit card age — just as India telescoped into the mobile revolution, leapfrogging other nations who first went through 100% landline penetration.

Will there be changes or relaxation in limits?
It’s an evolving situation. The queues have shortened and deposits are 50% less than on the first day. Our focus now, having addressed the urgencies in cities, will be rural India. Of course, cities will adapt to new technologies faster. I won’t be surprised if very soon you are able to swipe your card in temples.

What is the message to people standing in queues?
I’d say you have a plethora of options. Obviously, debit or credit cards are very much available in cities. India has 71.2 crore debit cards, 2.6 crore credit cards and over 20 crore RuPay cards of Jan Dhan accountholders. People now have the opportunity to activate those.

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