Next generation will look at demonetisation with great pride: Arun Jaitley

New Delhi: Mounting a powerful defence of the demonetisation measure designed to curb black money, Finance Minister Arun Jaitley on Tuesday said that note ban cannot be a one-stop solution to cleanse all corruption, but it did give a "new direction" to economic and financial decisions.

"Demonetisation is not a one-stop solution to end corruption. It cannot be, but it did change the agenda. And that changed agenda is that we should go towards less-cash economy. Individual tax payers` number has increased, digital transactions have gone up and terror funding has squeezed," Jaitley said on eve of note ban anniversary.

The Finance Minister said he was "more than satisfied" with the new direction the economy is moving.

"We at BJP believe that for the nation`s economy and its future, it was necessary to change the status quo. Domination of cash in any economy, especially having 86 percent of currency as high denomination notes, and excessive cash transactions lead to tax evasion. In such cases the taxpayers have to bear the burden, of the evaders too," Jaitley said.

He said it is unjust that resources meant for the country`s development and welfare of the poor should be kept in rich people`s coffers. He said that though corruption will not end even in less-cash system it will become difficult to indulge in corruption.

Referring to November 8, 2016 as a watershed moment in the history of the Indian economy, Finance Minister said one of the important objectives of demonetisation, which was to make the country a less cash economy and reduce the flow of black money, had been met.

November 8, 2016 will be viewed with pride by next generation as it provided them a fair and honest system to live in, Jaitley said.

The next generation will view post Nov, 2016 national economic development with a great sense of pride: FM https://t.co/32kSA5G2Mb

— PIB India (@PIB_India) November 7, 2017

But he conceded, in his Facebook post, that the benefits of the move may not be immediately visible to some people, though they would be apparent to the coming generation. "The next generation will view post November, 2016 national economic development with a great sense of pride as it has provided them a fair and honest system to live in," he added.

Jaitley said one of the important objectives of demonetisation was "to make India a less cash economy and thereby reduce the flow of black money in the system. The reduction in currency in circulation from the base scenario reflects that this intended objective has been met," the Finance Minister said in a facebook post. The minister has said this before, but Prime Minister Narendra Modi in his November 8 speech had not mentioned this objective.

Jaitley in his post said the published figure of "currency in circulation" for half year ending September, 2017 stood at Rs 15.89 lakh crore, showing year-on-year variation of (-) Rs 1.39 lakh crore.

"...whereas year-on-year variation for the same period during last year was (+) Rs 2.50 lakh crore. This means that reduction in currency in circulation is of the order of Rs 3.89 lakh crore," said the minister.

The RBI in its Annual Accounts reported that Specified Bank Notes (SBNs) of estimated value of Rs 15.28 lakh crore was deposited back as on June 30, 2017.

The outstanding SBNs as on November 8, 2016 were of Rs 15.44 lakh crore value. The total currency in circulation of all denominations as on November 8, 2016 was Rs 17.77 lakh crore.

Jaitley added that when demonetisation was implemented, one of the intended objectives was to put identity on the cash holdings in the economy.

"With the return of Rs 15.28 lakh crore in the formal banking system, almost entire cash holding of the economy now has an address. It is no more anonymous," the minister asserted.

"From this inflow, the amount involving suspicious transactions based on various estimates ranges from Rs 1.6 lakh crore to Rs 1.7 lakh crore. Now it is with the tax administration and other enforcement agencies to use big data analytics and crack down on suspicious transactions," he added.

Jaitley informed that the number of suspicious transaction reports filed by banks during 2016-17 has gone up to 3,61,214 from 61,361 in 2015-16. He mentioned that the increase during the same period for financial institutions was from 40,333 to 94,836 and for intermediaries registered with SEBI the increase was from 4,579 to 16,953.

The minister said the exercise to remove the anonymity with currency has further yielded results in the form of 56 lakh new individual tax payers filing their returns till August 5, 2017.

"Self-Assessment Tax (voluntary payment by tax payers at the time of filing return) paid by non-corporate tax payers increasing by 34.25 per cent during April 1 to August 5 in 2017 when compared to the same period in 2016," he wrote in the social media post.

Jaitley said with data collected during demonetisation period leading to identification of 2.97 lakh suspect shell companies, further actions were taken under the law to stop operation of bank accounts of these struck-off companies.

"Simultaneously, Income Tax Department has taken action against more than 1,150 shell companies which were used as conduits by over 22,000 beneficiaries to launder more than Rs 13,300 crore," he said.

Pointing out towards other benefits of demonetisation, Jaitley wrote that the attempt towards curbing of black money led to an acceleration in the financialisation of savings, and the country has taken a big leap in digital payment during 2016-17 with a shift to less cash economy.

"In an overall analysis, it would not be wrong to say that country has moved on to a much cleaner, transparent and honest financial system," Jaitley wrote in conclusion.