Demonstration: Its Legal, Politics And Economy Dimensions
There
are three dimensions to Demonetization debate: Legal, Political and Economic
dimensions. There were 58 petitions filed against government’s decision to
implement Demonetization on various objections. Hon’ble Supreme Court rejected
all the contentions of the petitioners. Issues with regards to Central
Government’s power, the decision making process, the period provided for
exchange of notes, consultations with the Reserve Bank of India; The Court
observed that the Government and the RBI had considered all the relevant
factors before taking decision and merely because some citizens faced hardship,
it cannot be said to be bad in Law
Demonetization was a decisive strike
against corruption, black money, counterfeit currency and terrorism. As a
result of demonetization, there is greater transparency
A six-year period is more than enough
time for any policy to be reviewed threadbare and determine if it was
beneficial or not. The Supreme Court of India’s verdict has done just that. The
Supreme Court upholding the decision of the Central government, should settle
all including the Legal aspects of Demonetisation debate.
This should have satisfied opposition parties including Congress. The Congress
had systematically attempted to erode the confidence of the people over the
years. It is the Congress party that had misled the entire Nation. By spreading
misinformation, the Party had tried to stall this pro-poor reform.
On the Political
dimension, people have welcomed the decision with open arms. Shri Narendra Modi
has won major State Elections held since 2016, with overwhelming majority
including that of Uttar Pradesh in 2018 and National General Elections in 2019.
People have shown full confidence in the vision and decisions of Shri Narendra
Modi ji, whether it is the fight against Covid pandemic, implementation of GST
etc. etc.
As I look after
the economic affairs at the Party forum, I will delve deeply on the economic
aspect of the debate. This aspect is the least understood and therefore much
confusion has been created by the Opposition Parties.
Demonetisation
was a decisive strike against corruption, black money, counterfeit currency and
terrorism. As a result of demonetization, there is greater transparency in
business environment, as well as an increase in tax compliance. Several lakh
shell companies (3.8 lakh Shell companies and 4.5 lakh directors related to
shell entities) have been unearthed and struck off Registrar of Companies
Affairs. Penal actions have been initiated against these Companies and their
Promoters. Post-demonetisation, Hawala operators and Dabba trading have been
severely affected.
The introduction of demonetization has led to the formalization of the business
ecosystem. Tax base expansion has led to an increase in revenue for the
economy. The government has used this revenue to create better urban and rural
infrastructure in India and improve social services. Rise in tax collections
and improvement in the Tax-to-GDP Ratio can be attributed to demonetisation. It
has helped India move towards the ideal situation where low taxes are levied on
a large base.
Following
decades of institutionalized discrimination against the lower strata of the
pyramid i.e. the poor population in the country, demonetisation significantly
increased financial inclusion among those previously excluded. Pre and
Post-demonetisation, crores of new bank accounts were opened under the Pradhan
Mantri Jan Dhan Yojana (PMJDY), bulk of which (80 per cent) were with public
sector banks. Of the new Jan Dhan accounts, 53.6 per cent were in urban areas
and 46.4 per cent are in rural areas.
Modi Government
has been cracking down on hoarders of black money and those who had stolen
money from the people. Focused approach of our government, through initiative
like Insolvency and Bankruptcy Code (IBC), Benami Transactions (Prohibition)
Amendment Act, Amendment to the prevention of Corruption Act, Whistle Blower
Protection Act, Income Disclosure Schemes, Foreign Illegal Assets Declaration
Scheme, Undisclosed Foreign Income and Assets (Imposition of Tax) Act, along
with Demonetisation has been successful in breaking the backbone of black
economy in the country. Demonetisation was not the step in isolation but our
effort have been 360 degrees.
Simultaneously
our government has strengthened the Social welfare delivery mechanism for the
poor and plugged leakages from public distribution systems. With the Jan Dhan
Accounts and digital payments, government initiated the Direct Benefits
Transfer infrastructure.
During
Demonetisation, non-profit organizations & non-corporates were the
second-largest category of entities with regard to average cash deposited.
While they account for only 4.6% of PAN nos, cash deposited by them accounted
for a disproportionate 16.2%.
Demonetisation
in 2016 mandated that any undisclosed income, in the Rs 500 and Rs 1000 notes
denominations – had to be deposited into bank accounts or declared for a formal
change. At that time, 86.9% of the legal currency in circulation (15.4
trillion) existed in these two denominations.
Post-demonetisation,
digital payments have become an integral part of daily life. In terms of
digital payments, India at present is ranked first in the world today. As per
the volume, the value of digital transactions has multiplied many-fold.
Congress has always mocked Indians, Congress’ former Finance Minister in
Parliament questioned the ability of our poor brothers and sisters to embrace
digital technology.
Demonetization
has had a long-term, systemic and behavioral change among the people as well as
entities. Demonetization led to a permanent increase in the use of digital
transactions. The more dramatic effects were seen in the payments sector.
Some important indicators points to the positive impact of Demonetisation:
The share of Currency in circulation (CIC) in payment systems has been
declining from 88% in FY16 to 20% in FY22 and is estimated to go down further
to 11.15% in FY27. Use of paper based instruments such as cheque etc. has
declined from 46% in FY16 to 12.7% in FY22. Since the inception of Unified
payment Interface (UPI), every month online transactions have been increasing
and has touched Rs 84 lakh crore in FY22. The NPCIL operated platform saw an
increase from 1 lakh transactions in October 2016 to almost 783 crore in
December 2022.
The Fintech industry
has also seen tremendous growth in India over the last decade after the
digitalization push by the government which was catalysed by Demonetization.
With a Fintech adoption rate of 87% against the global average of 64%, India is
one of the fastest-growing Fintech markets in the world. More than 6,636
Fintech startups in India meant that the industry had a market size of $50
billion in 2021, and it is estimated to reach $150 billion by 2025. India’s
Fintech industry is expected to grow at a CAGR of 20% to reach a transaction
value of $138 billion in 2023.
