For only 3 months: FM
Jaitley predicts a bigger and cleaner economy, more money in banks, wider tax base in a year
NEW DELHI: Finance minister Arun Jaitley said on Friday the recall of 500-and 1,000-rupee notes will cause just three months of disruptions before yielding substantial benefits for the economy.
In a year, he sees a bigger and cleaner economy with less paper currency, a wider tax base with lower rates, and more money in the banks resulting in cheaper loans. All of this will help the country’s ambition of becoming a modern and digital economy befitting its status as the world’s fastest growing major economy.
“If you switch over from a particular way of life and conducting expenditure, there is disruption. But I do not see the disruption lasting long, maybe a quarter or so. But if you look at the next 12 or 15 months, the impact will bebeneficial,”Jaitleysaidattheinauguralsessionof theHindustanTimes Leadership Summit in New Delhi.
The government recalled 500- and 1,000-rupee notes on November 8, culling 86% of cash in circulation to purge the economy of illicit “black money” and fake bills.
The move, said Jaitley, will prove a windfall in many ways. Banks, flush with money from new deposits, will be able to give social, infrastructure, industrial, and trade loans at lower rates. He, however, said the amount of new banknotes being released will not touch the November 8 level, and that will help the country along the path of becoming a digital economy.
“The volume of formal trade and business will grow in size... 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 argued in defence of the so-called demonetisation. CONTINUED ON PAGE 6