Cashless economy

GAME-CHANGING ideas meet with resistance. In 1991, when then-finance minister Manmohan Singh mooted the idea of liberalisation, he was opposed by many. Likening that to the demonetisation decision taken by his government, Union finance minister Arun Jaitley said while it may not be easy to accept new ideas, this one had the potential of confronting the normal and creating a new normal, which will pay big dividends for India in the future.

He was speaking at the opening session of the Hindustan Times Leadership Summit 2016, the theme of which is “The Change India Needs.”

Despite all the gripes from political opponents and the media about the faulty implementation of this decision, the government is pressing ahead in the belief that people have accepted that the difficulties they are experiencing are for the greater common good. There will be no return to the volume of currency in circulation on November 8, as India transitions to a cashless economy.

The finance minister felt that one of the most positive fallouts would be the fact that this has paved the way for all transactions to be conducted totally transparently going forward. It would impact tax compliance, real estate deals, entrepreneurship and funding for political parties. One fear is that this would adversely affect the implementation of the Goods and Services Tax.

Constitutionally, the GST has to come into force by September 16, 2017, by which time remonetisation will be complete – or so the government seems to think. The government is gambling on a tax base expansion to fund its social welfare schemes. It could well be the change that India needs.