Towards creating a new normal

There’ll be disruption but demonetisation, the FM says, will yield huge dividends

Game-changing ideas meet with resistance. In 1991, when then Union finance minister Manmohan Singh mooted the idea of liberalisation, he was opposed by many across the board. Likening that to the demonetisation drive, Union finance minister Arun Jaitley said that 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 the Opposition and media about the faulty implementation of this decision, the Centre is pressing ahead in the belief that people have by and large accepted that the difficulties they are facing 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. Mr Jaitley felt that one of the most positive fallouts would be the fact that this has paved the way for all transactions to be conducted transparently going forward. It would impact tax compliance, real estate deals, entrepreneurship and funding for political parties. One fear that has been raised recently is that this would adversely affect the implementation of the Goods and Services Tax. However, constitutionally, the GST has to come into force by September 16, 2017 by which time remonetisation will be complete or so the Centre seems to think. While this may be a little too optimistic, the juggernaut of digitisation will roll on and transform the way Indians think. He did not give much credence to the estimates by some experts that there would be 2% dip in GDP, saying that such calculations could not be substantiated at this stage. The central government is gambling on a tax base expansion to fund its social welfare schemes, which if it works, would be a major boost not just for the political fortunes of the BJP but for the economy as well. Such a move is a major political gamble but Mr Jaitley felt that by staying ahead of the curve, the party has benefited in the upcoming elections in UP because people see it as being on the right side of technology.

But there is still a long way to go before the benefits of a cashless economy will move from the affluent to the aspirational and then further down the line. It could well be the change that India needs since corruption and black money have really tarnished its image. For this, there has to be a painful transition with its unpleasant side-effects. But for now, the government has clearly decided to grasp the demonetisation nettle.