After the announcement of demonetisation on November 8, 2016, the central government for the first time has given a detailed answer to the benefits of the move in the Lok Sabha on Monday (December 2). In a reply to Parliament, Minister of State for Finance Anurag Thakur said the objective behind the demonetisation was flushing out black money, eliminate fake Indian currency notes, to strike at the root of terror financing and left-wing extremism, to convert the non-formal economy to a formal one with a view to expand the tax base and employment and to give a big boost to digitalisation of payments to make India a less-cash economy.
Citing the latest data, Anurag Thakur said that notes in circulation (NIC) in the economy have increased to Rs 22,420 billion in November 2019, as compared to Rs 17,741 billion on November 4, 2016, just before Prime Minister Narendra Modi announced the demonetisation measure. While this implies an increase in notes even after demonetisaion, Thakur said that demonetisaion and digital cash initiatives succeeded in reducing the notes in circulation by as much as Rs 2,934.80 billion.
The MoS for Finance said that NIC had grown at an average growth rate of 14.51 per cent year-on-year from October 2014 till October 2016. At this rate, the NIC would have increased to Rs 25,354.93 billion as of November 25, 2019. As the actual NIC on the said date is only Rs 22,420 billion, demonetisation followed by digitalisation and reduction of cash use in the informal economy has succeeded in reducing NIC by as much as Rs 2,934.80 billion.
Thakur also claimed that demonetisation resulted in the curbing of the counterfeit currency. Notably, the Reserve Bank of India (RBI) reported that 7.62 lakh pieces of counterfeit banknotes were detected in the banking system during 2016-17, 5.22 lakh pieces in 2017-18 and 3.17 lakh pieces in 2018-19.
The demonetisation also resulted in curbing violence in the country, as illegally held cash formed the major chunk of terrorist funding, but after demonetisation, most of the cash held with the terrorists turned worthless. During November 2016 to March 2017, the Income Tax Department conducted search and seizure operations leading to the seizure of Rs 900 crore.
To further substantiate the benefits of demonetisation, the government said that there has been an increase in employment, while quoting the Statistics Ministry`s Annual Survey of Industries for the fiscal ending March 2018, that showed an increase in the jobs in the organized manufacturing sector.
During 201-15 to 2017-18, the total number of workers has increased by 14.69 lakh and total persons engaged has increased by 17.33 lakh in the organised manufacturing sector in India. As many as 285.3 lakh members joined the Employees Provident Fund Scheme (EPF), 310.3 lakh joined the Employees State Insurance (ESI) scheme, and 15.7 lakh joined the National Pension Scheme (NPS) during September 2017-19, said the government.
Further, the government informed about the significant increase in the use of digital payments in the country since demonetization. In fiscal 2016-17, the total number of digital transactions were 1,023 crore, which increased to 2,070 crore in the next year with a jump of 104 per cent, and to 3,133 crore in 2018-19, recording a jump of 51.35 per cent, the statement added.
The government said that the growth rate was not downgraded according to the Moody’s, but was rather upgraded, and the Indian economy’s outlook also changed from positive to stable. Notably, the Moody’s outlook turned negative from stable in 2019.
On the domestic front, the savings trend has also witnessed an increase. In 2015-16, the currency saving was more than two lakh crore rupees, and it increased to Rs 4,70,809 crore in 2017-18. Net financial savings also increased from Rs 11,10,845 crore to Rs 11,29,012 crore.
The government has reiterated that demonetisation has overall benefited the country’s economy.