NEW DELHI: Finance minister Arun Jaitley released data on Thursday to dismiss suggestions about demonetisation resulting in widespread economic contraction even as he asserted that the process of remonetisation was “substantially advanced” and the situation should certainly be much better in the coming weeks.
The minister pointed to tax data and other parameters — life insurance and mutual fund sales, tourist arrivals and fuel consumption — to argue that the economy was doing well and to refute “critics” who have claimed that the invalidation of currency notes of Rs 500 and Rs 1,000 has stunted growth.
Between April 1 and December 19, the government saw its direct tax kitty swell by over 14% to Rs 6.65 lakh crore, with advance tax collections, seen as a proxy for growth in income, too rising by around the same level. The indirect tax figures till November 30 showed a 26.2% rise. While excise duties went up by 43.5%, service tax was 25.7% higher and customs duties were up by 5.6%, a part of which could be attributed to the higher levies on petrol, diesel and crude petroleum. In agriculture, rabi sowing for all crops was 6.3% higher than last year. The flow into mutual funds increased by 11%. The predictions of the government’s critics were not reflected in the revenue collection. “Assessment can be unreal but revenue is real,” he said
Jaitley said PM Narendra Modi’s decision to scrap Rs 500 and Rs 1,000 notes had received widespread support despite the inconveniences suffered by people in the past few weeks. The minister said a large part of the benefits of demonetisation was visible and a lot more money had come into the banking system and much of it would be liable to be taxed and revenue collection would improve.
“We are extremely grateful to the people of India who have in very large measure supported the move… what is significant is not a single incident of any form of unrest has been reported in the country.” There is no cash shortage and RBI has very large amounts of currency available and it will continue to support the market to the extent that the market needs that kind of liquidity, the minister said. Answering questions about how soon normal banking would be restored, Jaitley said, “That is a decision the central bank will take in consultation with everyone.” He said concerns that GDP would take a hit did not prove to be as dire as feared. “I think one is clear, there could have been some adverse impact for a quarter or so. It doesn’t appear to be as adverse as it was being predicted,” he added.
Jaitley said a “very large” part of the old currency that went out of circulation after Modi’s November 8 address to the nation had been replaced and would continue to be replaced to the extent that the market required. Though he did not spell out how much of the scrapped currency was replaced, the minister said an increasing number of Rs 500 notes was being released through banks and post offices. This will enable the banking system and ATMs to further improve cash supply, he added.