Rubbishing critics, finance minister Arun Jaitley said on Thursday that the effects of demonetisation were not as adverse as was predicted, and asserted that there had been a sharp jump in tax collections and economic activity.
Ahead of the expiry of the 50-day deadline for depositing the junked 500- and 1000- rupee notes on Friday, he said the remonetisation process has substantially advanced, significantly without a single incident of unrest anywhere in the country.
However, talking to PTI, the finance minister refused to hazard a guess on the GDP growth for the year or the possible impact on tax proposals in the his budget for 2017-18 on account of the increased revenue collections.
Replying to questions on when customers can see easing of curbs on cash withdrawals, Jaitley said: “That is a decision the central bank will take in consultation with everyone.”
Asked about fears expressed by critics that the note ban decision will hit the economy and the GDP growth, he said, “I think one is clear, there could have been some adverse impact for a quarter or so. It doesn’t appear to be as adverse as it was being predicted.
“But in the long term, you have to plan the economy in the long term, the changes in the system which are coming about will certainly mean more money in the banks, more money with the revenue and probably a much larger and cleaner GDP,” he said.
To a query about whether the rising revenue collections would have any impact on taxation in the coming budget, he said, “I think you will have to wait for that.”
Asked whether the government would take a conscious decision to reduce the quantity of money in circulation in the remonetising process, the finance minister said: “That is a decision RBI will take and they will be certainly guided by the requirements of the market.”
“But obviously one of the intentions as far as government of India is concerned is that the paper currency should shrink and a large part of businesses should be in the alternative digital or cheque mode. Considering the very large increase in digital users that have taken place we seem to be moving in the right direction,” he said.
Jaitley said a large part of the Rs 15.4 lakh crore of old high denomination notes in circulation on November 8 have already been replaced and the Reserve Bank of India (RBI) has a very large amount of currency available to support any liquidity need.
“Already a large part of benefits of this historic move are visible. A lot more money has come into the banking system,” he said.
While the ability of banks to support economic activity has increased, direct and indirect tax collections have gone up significantly.
Till December 19, net increase in income tax collections has been 14.4% and even after accounting for large refunds, the net rise in collection is 13.6%, he said.
Indirect tax collections soared 26.2% between April 1 and November 30, with revenue from excise jumping 43.5%, that from service tax by 25.7% and customs by 5.6%, he said.