Demonetisation helped helped tackle tax evasion, Finance Minister Arun Jaitley said
Finance Minister Arun Jaitley today lashed out at critics of demonetisation, dubbing them "prophets of doom" hours after former prime minister Manmohan Singh's scathing takedown of the move he said had left scars and wounds that were getting more visible with time. Attacked by the opposition on the second anniversary of the notes ban, Mr Jaitley said India managed "respectable growth" despite global stress because of the "courage" of the prime minister.
"What happened to the Prophets of Doom who predicted a 2 per cent hit to the GDP? For the fifth year running, for the first time in its history, India has been the fastest-growing large economy," Mr Jaitley told reporters.
"Under the leadership of the Prime Minister we took decisive steps. These steps will help us in the long run. We can see the effect in just two years."
The senior minister also posted on Facebook that Prime Minister Narendra Modi's overnight ban on higher currency notes on November 8, 2016 was a key step in a chain of important decisions taken by the government to formalise the economy.
The number of people filing income tax returns has increased from 3.8 crore in May 2014 to 6.86 crore in four years of the BJP-led government, he said in the post titled "Impact of Demonetisation".
People wait in a long queue outside a bank after high-value notes were scrapped overnight on November 8, 2016 (File)
Mr Jaitley said the notes ban had helped tackle tax evasion and the extra resources from increased tax collection had been used in infrastructure, social sector and villages.
The finance minister also parried massive criticism of the government after the Reserve Bank of India's annual report showed that 99.3 per cent of the banned cash had returned.
"An ill-informed criticism of the demonetisation is that almost the entire cash money got deposited in the banks. Confiscation of currency was not an objective of demonetisation. Getting it into the formal economy and making the holders pay tax was the broader objective," he wrote.
Demonetisation compelled people to deposit cash — which involves anonymity in transactions and enables tax evasion — in banks, Mr Jaitley argued. "The enormity of cash deposited and identified with the owner resulted in suspected 17.42 lakh account holders from whom the response has been received online through non-invasive method," he shared. The violators faced action, larger deposits helped the lending capacity of banks and a lot of money was diverted to mutual funds.
Digital transactions had increased, he said, adding that Visa and Mastercard were losing market share in India to indigenously developed UPI and RuPay card.
Mr Jaitley said demonetisation, along with GST or goods and services tax, had curbed cash transactions in a big way. "An increase in the digital transactions is visible. This formalisation of the economy has led to the tax payer base increase from 6.4 million in the pre-GST regime to 12 million tax payers in the post-GST regime."