Will have longterm benefits, help curb tax evasion: OECD

The demonetisation of high-value currency notes by the government will have long-term benefits and complement other initiatives taken by the government to fight black money and reduce tax evasion, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.

In its Economic Survey for India released on Tuesday, the body of rich countries said implementing demonetisation will have a transitory impact with short-term costs. “The shift towards a less-cash economy and formalisation should, however, improve the financing of the economy and availability of loans and should promote tax compliance,” the survey said.

The International Monetary Fund in a report released last week said India’s demonetization drive may have a larger-than-anticipated negative impact on the economy in the near term through weaker private consumption, but will likely deliver positive benefits in the medium term by curbing tax evasion.

Prime Minister Narendra Modi on November 8 invalidated ₹500 and ₹1,000 currency notes as part of his government’s fight against black money.

Speaking at the launch of the Survey, economic affairs secretary Shaktikanta Das said the process of remonetisation is almost complete and the positive effects of demonetisation will be visible from April onwards.

“The impact of demonetisation was mostly on consumption and that was temporary. Long term and medium term, in the next quarter onwards, the benefits and outcomes are going to be very, very positive,” Das said.