India’s economy is getting back to normal two months after the scrapping of high-value banknotes, finance minister Arun Jaitley said on Sunday, attacking opposition parties for siding with what he called a “black money-friendly” status quo.
In a Facebook post, Jaitley said a surge in low-cost deposits had enabled banks to “lend for growth” that would bring down interest rates.
“The period of pain and inconveniences is getting over….there was no social unrest while implementing such a major decision,” he said. “Lakhs of crores, which were floating in the market as loose currency have now entered the banking system.”
Jaitley said the long-term gains of the move would outweigh the pain when the exercise was being implemented. “Drop in economic activity on account of the currency squeeze during the remonetisation period would have a transient impact on the economy,” he said.
The scrapping of Rs 500 and Rs 1000 banknotes – which made up 86% of India’s economy by value – saw a nationwide cash crunch and millions of people line up outside banks and ATMs to deposit, exchange or withdraw money. A 50-day window to turn in old notes expired on December 30.
“The Indian normal has been to undertake transactions partly in cash and partly in cheque. Tax evasion has been considered as neither unethical nor immoral. It was just a way of life. The Prime Minister’s decision is intended to create a new normal,” Jaitley said.
The move was aimed at draining illegal cash from the economy but opposition parties and some economists have argued that the move has adversely affected farmers and the poor with large-scale job losses and a hollowing-out of the rural economy.
“The Prime Minister was thinking of the next generation while Rahul Gandhi was only looking at how to disrupt the next session of Parliament.”
The move also came under fire after almost the entire amount that was demonetised came back into the system, leaving many wondering about the effectiveness of the scheme. However, Jaitley said that black money did not change its colour merely by getting deposited in the bank. “On the contrary, it loses its anonymity and can now be identified with its owner,” he said.
Jaitley said that the decision to replace the currency required both courage and stamina. “It is a tragedy that a national party like the Congress decided to adopt a political position, opposing both technology, change and reforms. It sided with black money friendly status quo,” the finance minister said.
His comments come a month before assembly polls in five states – including Punjab and Uttar Pradesh – where demonetisation is expected to be a top issue.
Blaming the Opposition for disrupting the winter session of Parliament, he said, “The Prime Minister was thinking of the next generation while Rahul Gandhi was only looking at how to disrupt the next session of Parliament.”
On Friday, the country’s GDP growth projection for the currenct financial year was reduced to 7.1%. However, several think tanks have indicated that GDP growth would be lower than 7%.