Repeating his rhetoric from 2017, Finance Minister Arun Jaitley on Thursday clarified that confiscation of currency was not the objective of demonetisation. On the other hand, note ban was implemented to promote digital transactions and raise tax base, he said. "Getting it (cash) into the formal economy and making the holders pay tax was the broader objective. The system required to be shaken in order to make India move from cash to digital transactions. This would obviously have an impact on higher tax revenue and a higher tax base," Jaitley stated on the second anniversary of demonetisation.
At the same time, he asserted that banks improved their lending capacity, thanks to the large deposits that came in after demonetisation. "A lot of this money was diverted to the mutual funds for further investments. It became a part of the formal system." Defending demonetisation, he added that the move led to identification of 17.42 lakh suspected account holders "from whom the response has been received online through non-invasive method", with violators facing "punitive actions".
READ: India has changed, thanks to demonetisation, writes T.V.Mohandas Pai
On November 8, 2016, Prime Minister Narendra Modi sent shock waves across the country as he banned Rs 500 and 1,000 notes as legal tenders. Modi had then said that the tough decision on demonetisation was taken to fight against black money and terrorism. However, soon the narrative shifted to promoting cashless transactions and increasing tax base. And hence, unsurprisingly, Jaitley's statement on Thursday was devoid of the words 'corruption, terror financing and counterfeit currency'—the main objectives when demonetisation was announced two years ago.
Emphasising on rise in digital transactions, Jaitley said Unified Payment Interface (UPI) transactions have grown from Rs 50 crore in October, 2016 to Rs 59,800 crore in September. Payments app BHIM, developed by NPCI, has a user base of 1.25 crore people. "The value of BHIM transactions has gone up from Rs 2 crore in September, 2016 to Rs 7,060 crore in September. The share of BHIM transactions in overall UPI transactions is at about 48% in June, 2017," Jaitley said.
Similarly, government-promoted RuPay card transactions have increased from Rs 800 crore before demonetisation to Rs 5,730 crore in September for Point-of-Sales machine and from Rs 300 crore to Rs 2,700 crore in e-commerce. "Today Visa and Mastercard are losing market share in India to indigenously developed payment system of UPI and RuPay card whose share have reached 65 per cent of the payments done through debit and credit cards," Jaitley claimed. Recently, it was reported that card payments giant Mastercard was unhappy over Modi's promotion of RuPay Cards.
Further, Jaitley said the post-demonetisation years saw a rise in collection of tax as well as the tax base. "Its collections were higher in financial year 2018-19 (till 31-10-2018) compared to the previous year by 20.2 per cent. Even in the corporate tax the collections are 19.5 per cent higher."
