Economy formalised, tax base widened: FM

The larger purpose of demonetisation was to move India from a tax noncompliant society to a compliant society

ARUN JAITLEY, Finance minister

NEWDELHI: The invalidation of currency that didn’t come back into the system was “certainly not” the only object of demonetisation, finance minister Arun Jaitley said on Thursday, adding the larger purpose of the note ban was to make India a tax-compliant society.

This necessarily involved the formalisation of the economy and a blow to black money, he said in a post on the social media, a day after the Reserve Bank of India said in a report that almost all banknotes banned two years ago had been deposited. The Opposition has used that report to criticise the government, asking it what the objective of demonetisation was if all the money came back into the system.

Jaitley wrote that the positive impacts of demonetisation included the formalisation of economy, more money in the system, higher tax revenue, higher expenditure and higher growth after the first two quarters.

RBI said in its annual report that ₹15.31 lakh crore of the ₹15.41 lakh crore in circulation in ₹500 and ₹1000 notes that were invalidated on 8 November 2016, had returned to the banking system. Critics of demonetisation suggested the exercise failed in achieving one of its principal targets of tackling on black money.

In his post, Jaitley argued that the anonymity about the owner of cash disappears when money is deposited in banks.