India changing rapidly, says man at the centre of big bang reforms
Demonetisation and GST will make country a digital and modern economy, says finance minister
NEW DELHI: Finance minister Arun Jaitley was delighted when asked, at the Hindustan Times Leader Summit on Friday, whether the country had the appetite to absorb two big bang reforms.
“The last two years, I was being asked where big bang was. Now you ask if we can afford big bang,” said Jaitley, who is at the centre of both the bangs.
The first, the recall of `500 and `1,000 notes, strikes at the stock of black money in high-denomination currency. The second, the goods and services tax (GST), curbs the creation and flow of black money through a system of indirect taxes that is uniform across the country and captures every transaction on an IT backbone.
These two moves are the latest instances of the rapid change India is undergoing, said Jaitley, so rapid that politicians and the media are not able to grasp it.
“There are always sections in this country reluctant to accept change,” he said. He recalled that in the early 1980s the country was debating whether India needed colour televisions. Some said that would be a waste of national resources.
In 1996, the media reported with enthusiasm that the BJP had acquired seven mobile phones for its conference in Mumbai. Few, said Jaitley, paid much attention to LK Advani anointing Atal Bihari Vajpayee as the party’s candidate to be prime minister.
As recently as 15 years ago, he said, Ram Vilas Paswan, communications minister at the time, used to call the mobile a rich man’s phone. “If someone had suggested every poor man or dalit will one day have a mobile phone, most of us would have reacted with disbelief,” said Jaitley.
Now, with demonetisation and GST, India is at the cusp of becoming a modern and digital economy. “What was normal in India? You go and buy a property, you pay some amount in cash, some in cheque. You start a trade, wholesale or retail, there is so much in kachcha khaata and so much in pucca. Do developed economies behave like this?” he asked. “The way things are changing in India, we will have a more digitised economy. It is bound to happen. This decision (demonetisation) will only accelerate it.”
The government has every intention of implementing the GST from April 1 next year. It anyway does not have the option to delay it beyond September, as laid down in the legislation for the new tax. “Once the remonetisation is complete and GST implemented, there will be a huge impact on India’s businesses and the Indian way of life,” said Jaitley. “It is a tax system extremely difficult to evade. Each limb of transaction is captured on the IT support system.”
Jaitley also appeared to take on a big challenge for himself. Talking about the malpractices in the economy, he said, “The world’s largest democracy still has a lot of hush-hush about the way elections and politics are funded.”
As the law minister in the Vajpayee government, Jaitley had led an amendment to the Income Tax Act to help companies make political donations through cheques up to 5% of their profits. “I still concede this is not adequate,” said Jaitley.
He expressed the hope that the demonetisation will help make political funding more transparent. “At the end of the day, donors will say, ‘Where do I bring this money from? The only donation I can give is legitimate’.”
That could be the beginning of a third big bang.