Published On : Sat, Dec 17th, 2016

Time to scrap the last 70 years and create a new ‘normal’ says Jaitley

New Delhi:
Finance Minister Arun Jaitley while addressing the annual general meeting of industry chamber FICCI stated about demonetization:

“One of the efforts of this exercise has to be that even though a reduced cash currency could remain, our conscious effort… (is) to supplement the rest with a digital currency.”

With this statement the Finance Minister has given a clear indication that not all of the Rs. 15.44 lakh crore worth of currency junked will be remonetised through issuance of new notes as they hope that digital currency will fill the gap.

Calling the scrapping of old Rs. 500 and Rs. 1,000 notes as “a courageous step”, Jaitley said the government could do it as India today has the capacity to take such decisions and experiment boldly.

The move will create a new Indian normal as the one that existed for the past seven decades is “unacceptable”, he stressed, adding that banning the high denomination notes will help rid the economy of cash circulation that had led to tax evasion, black money and currency being used for crime.

As many as 17,165 million pieces of Rs. 500 denomination and 6,858 million pieces of Rs. 1,000 banknotes were in circulation on November 8 when the government made the surprise announcement.

“The whole process of remonetisation is not going to take very long time” he added, expressing confidence that very soon the Reserve Bank will inject enough currency into the banking and postal system.

Jaitley also commended how the use of digital mode to make payments is gaining ground.

“The manner it has taken place in the last five weeks is indeed commendable. Only a section of Parliament seems unaware of what is happening,” he said taking a swipe at opposition MPs.

“The 70-year normal (of a cash heavy economy) had become a way of life for almost every Indian. It was not merely a fact that you had a lot more cash currency, far larger cash currency as part of your GDP… the economic and social consequences of that are extremely adverse.”

He concluded that dealing in that cash currency had led to a lot of aberrations in terms of tax non-compliance, currency being used for collateral purposes like crime, escaping the tax net and not getting into the banking system.

The twin steps of demonetization and only partial remonetization is the cure, clearly feels the F.M.