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NDA, opposition spar on anniversary of demonetisation

Livemint logo Livemint 08-11-2018 Gireesh Chandra Prasad

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The ruling National Democratic Alliance (NDA) on Thursday defended the merits of the high-value currency note ban announced this day two years ago, even as the opposition Congress party warned the government not to resort to “further unorthodox, short-term economic measures.”

Finance minister Arun Jaitley said in a Facebook post that the November 2016 demonetisation was a key step in a chain of decisions taken to formalise the economy, which had increased the number of taxpayers and made evasion more difficult. Jaitley’s post also said that digitization, financial inclusion and leak-proof direct transfer of state benefits to citizens were also part of the key measures taken.

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Former Prime Minister Manmohan Singh said in a statement issued on Thursday that the havoc the “the ill-fated and ill-thought demonetisation” unleashed on the Indian economy and society was now evident to everyone. “Notebandi (currency ban) impacted every single person, regardless of age, gender, religion, occupation or creed,” said the statement.

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Singh’s statement said that besides the steep drop in the economic growth rate, the deeper ramifications of the currency ban were still unraveling, and that small and medium businesses -- the cornerstone of India’s economy -- were yet to recover from the demonetisation shock.

“It is, therefore, prudent to not resort to further unorthodox, short-term economic measures that can cause any more uncertainty in the economy and financial markets. I urge the government to restore certainty and visibility in economic policies,” said Singh’s statement tweeted by the Congress.

The opposition party’s warning comes in the wake of reports that the government may invoke the never before used Section 7 of the RBI Act to issue directions to the central bank. Media reports also suggested that the government was seeking transfer of Rs 3.6 lakh crore, more than a third of the reserves of the central bank, to the government.

Also watch: "Scars only getting more visible with time": Manmohan Singh on note ban

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“Today is a day to remember how economic misadventures can roil the nation for a long time and understand that economic policymaking should be handled with thought and care,” said the statement from Singh. It also said demonetisation had a direct impact on employment as the economy continues to struggle to create enough new jobs.

Jaitley defended the currency ban, saying it compelled cash holders to deposit money in banks. “The enormity of cash deposited and identified with the owner resulted in suspected 17.42 lakh account holders from whom the response has been received online through non-invasive method,” said Jaitley. Larger deposits in banks improved lending capacity of banks, said Jaitley’s post. The minister also said that as a result of demonetisation, direct tax collections in 2018-19 till October-end had grown by over 20% compared to the same time a year ago. In 2017-18, the number of tax returns filed reached 6.86 crore, a jump of 25% over the previous year. The minister also said that in this fiscal year, up to October end, 5.99 crore tax returns had been filed, showing an increase of 54.3% over the number of filings made during the same time a year ago. New tax filers added this year are 8.6 million.

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