New Delhi, Nov 8 : As India completes two years of demonetisation today, Finance Minister Arun Jaitley defended the note ban and described PM Narendra Modi’s overnight ban on higher currency notes on November 8, 2016, as a “key step in a chain of important decisions taken by the government to formalise the economy”.
“Government first targeted the black money outside India. Asset holders were asked to bring this money back on payment of penal tax, Jaitley posted on facebook.
“Those who failed to do so are being prosecuted under the Black Money Act. Details of all accounts and assets abroad which have reached the Government resulted in action against the violators,” he stated.
An ill-informed criticism of the demonetisation is that almost the entire cash money got deposited in the banks. 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,” Jaitley wrote.
“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.”
“Personal income tax collections were higher in FY 2018-19 (till 31-10-2018) compared to previous year by 20.2%. Corporate tax collections are 19.5% higher. From 2 years prior to demonetisation, direct tax collections increased 6.6% & 9% respectively,” FM wrote.
The violators faced punitive actions. Larger deposits in banks improved lending capacity for the banks. A lot of this money was diverted to the Mutual Funds for further investments. It became a part of the formal system, FM Arun Jaitley on two years of Demonetisation.