Jaitley defends DeMo, calls it key step to formalise economy

Tribune News Service

New Delhi, November 8

Finance Minister Arun Jaitley on Wednesday strongly defended demonetisation, stating it moved towards formalisation of the economy, making it less dependent on cash, attacked black money, hastened digitisation and created positive impact on both direct and indirect taxes in the past two years.

On a day when the Opposition attacked the exercise with Congress president Rahul Gandhi accusing the government’s “spin doctors, including incompetent Finance Minister”, of defending an “indefensible, criminal policy”, Jaitley mocked the “prophets of doom” for predicting decline of GDP by 2 per cent when India remained the fastest growing economy in the world.

“What has happened to the ‘prophets of doom’ who said GDP will decline by at least 2 per cent. For the fifth year running, India will be the fastest growing (large) economy in the world. It is continuing to happen. So prophets of doom have been proven wrong. Even when there was global stress, we managed to have respectable growth rate,” he said.

On the second anniversary of demonetisation, Jaitley said it was a key step in a chain of important decisions to formalise the economy by targeting black money outside India with asset holders being asked to bring it back by paying penal tax and those who failed to do so being prosecuted under the Black Money Act.

Dismissing as “misconceived argument” that return of over 99 per cent of cash into system failed the objective, he said it was not confiscation of currency but making the holders pay tax. The move compelled holders of cash to deposit it in the banks and response was received from suspected 17.42 lakh account holders linked to accounts with enormity of cash deposited.

He said the system was needed to be shaken to make India move from cash to digital, which would have an impact on higher tax revenue and higher tax base. “Financial inclusion was another important step to ensure that even weaker sections became part of the formal economy. Jan Dhan Accounts have resulted in most people being connected to the banking system.”

He said the Aadhaar law has ensured that Direct Benefit Transfer of government support system reached directly into the bank accounts. “The GST has further ensured that in the matter of indirect taxes, the tax procedures become simple. It is now becoming increasingly difficult to evade the tax system.”

Push towards digitisation resulted in launch of Unified Payment Interface (UPI) involving real time payments that touched Rs598 billion in September. The Bharat Interface for Money (BHIM) is currently used by 1.25 crore people with Rs70.6 billion value of transactions in September.

Collection of direct taxes improved with a rise of 20.2 per cent in the current financial year, while corporate tax rose by 19.5 per cent. During 2017-18, 6.86 crore tax returns were filed against 3.8 crore in May 2014.