Defending demonetisation, finance minister Arun Jaitley on Thursday sought to deflect the criticism saying “prophets of doom” have been “conclusively proved wrong” with India growing as the fastest economy globally for the fifth year in a row.
Jaitley said demonetisation has strengthened the economy and increased the government resources to fund poverty alleviation and infrastructure development programmes.
“What has happened to ‘prophets of doom’ who said India’s GDP will decline by at least 2 per cent. For the fifth year running, India will be the fastest growing (large) economy in the world. It is continuing to happen. So prophets of doom have been proved wrong and conclusively proved wrong,” he told the media here.
In a Facebook post, he said note ban helped in formalising the economy, expanding tax base and earmarking more resources for the poor.
“Even when there was global stress, we still manage to have respectable growth rates and we had the courage because of leadership of the prime minister... we took decisive steps and these steps which are not economically correct have helped the system in the long run, and the long run in this case does not mean generations,” he said.
The finance minister said demonetisation has favourably impacted tax system, digitisation and formalisation of the India economy. “Of course, there is a long distance we still have to cover and I am certain in the coming years the advantage of these movements in the right direction will strengthen the India economy,” he said.
Giving details of impact of demonetisation, Jaitley said the number of income tax return filers has gone up to 6.86 crore from 3.8 crore in May 2014. “By the time the first five years of this government are over, we will be close to doubling the assessee base,” he said.
Jaitley further said with the implementation of the goods and services tax (GST), it is now becoming increasingly difficult to evade the tax system and the indirect tax to gross domestic product (GDP) ratio has gone up to 5.4 per cent post GST, from 4.4 per cent in 2014-15.
On the criticism that almost the entire cash money got deposited in the banks post demonetisation, Jaitley said confiscation of currency was not an objective of demonetisation.
“Getting it into the formal economy and making the holders pay tax was the broader objective. The system required to be shaken in order to make India move from cash to digital transactions. This would obviously have an impact on higher tax revenue and a higher tax base,” the finance minister said.