Demonetization is one of the most trending topics which occupied the
columns of Indian newspapers in 2016. The Indian government has long
struggled with the issue of the fake currency and black money. In 1946
and in 1978, the respective Indian governments turned to
demonetization as the long-term solution to the problem. The same
historical event took place at the stoke of hour on the midnight of
8th November 2016, where Central government announced demonetisation
policy. India lost 85% of high denomination currency and this topic
became moot point in every corner of India. The government has
different objectives behind this demonetization. The first and
foremost objective is to attempt to make India a corruption free
country. In his different speech on demonetization Indian Prime
Minister Narendra Modi clearly, points out that this bold step has
been taken to get a control over corruption in the country. Secondly,
it is done to curb black money, thirdly it is also a step to control
escalating price rise, fourth to stop fund flow to illegal activity.
The Hon’ble Prime Minister Shri Narendra Modi ji had to take the bold
decision to tackle many issues like parallel economy, counterfeit,
currency in circulation and terror funding. Initially, implementation
of demonetization in a populous country like India was not a cakewalk
for the government. The sudden declaration of demonetization in the
country had created lots of chaos and confusion among the common
people of the country, but gradually everything became normal.
Some of the benefits of this policy were to curb corruption and
accumulation of black money with one major benefit - economy moving
towards the cashless and digital economy. Some Impediments in
implementation like crash less banks & ATMs and trust issues in
digital transaction created hue and cry at ground level. Small
vendors, farmers, daily wages, trader etc suffered a lot as India is
largely a cash economy. Case transaction in our economy are far more
than the total number of electronics transactions.
Government had done tremendous job by replenishing the cash in very
short time and assured people who have lawful money not to worry.
Steps such as deploying POS machines, law with strong liability
clauses, providing digital infrastructure etc could have made it easy
for small merchants.
However Instead of making it political issue, everybody should look
into long run. Economy is slowly moving to cashless transaction. This
policy has long term potential which will fetch good result in long
term and should be supported by all.
What is Demonetization?
The discontinuity of a particular currency from circulation and a
replacement of it with a new currency has been termed as
Demonetization. In the present setting, it is the restricting of the
500 and 1000 section money notes as a lawful delicate. In other words,
it can also be said that a demonetization is an act of stripping a
currency unit of its status as legal tender. It occurs when a
particular form of money is pulled from circulation and a new note or
coin is introduced in the market as a replacement of withdrawn form of
money.
National Perspective:
The credit on successful and credible implementation of demonetization
goes to Hon’ble Prime Minister, Shri Narendra Modi ji who took the
historic decision of demonetization in the country. It is a very bold
decision towards economic reform in the country. The state govt under
the leadership of Chief Minister, Shri Pema Khandu fully supported and
stood behind the Central Leadership on its fight on black money and
fake currency which will go a long way in rooting out the evils of
corruption and terrorism. The Hon’ble Union Finance Minister, Arun
Jaitley ji in his speech during Vibrant Gujarat Summit, has also
mentioned that India was one of the five most fragile economies in the
world till recently. It can be now firmly belief that demonetization
has only made the economic position of the country stronger.
While it is seen in world over that advance countries are struggling
for a cashless economy, our great nation under the leadership of
Hon’ble Prime Minister Narendra Modi ji has already started rigorous
steps in this direction despite having only 2% digitised economy until
recently. Undoubtedly, Demonetization is a historic and an important
step towards economic inclusion, transparent governance and equitable
society in remaking of a strong India. The Government has ended any
role of and kind of middlemen from its beneficiary schemes like
MNREGA, financial assistance to poor students and subsidies to
marginal sections including SC/ST/OBC through digital transactions and
Direct Benefit Transfer. It also believes that the acts like
Industrial Disputes Act, Minimum Wages Act, Payment of Bonus Act,
Factory Act, Contract Labour Act will ensure justice for the poorer
sections of our society. The Amendment in Payment of Wages Act brought
in the Central Government is one of the most important steps towards
the welfare of the labour and workers of this country. It will
immensely benefit the poor workers employed and engaged largely in
sectors like Tea, Coffee, Rubber etc as daily wage earners.
Demonetization linked with the Digitization has curbed the menace of
under-payment as the employers are bound to pay wages as per minimum
prescribed norms with transparency in payments.
The decision of demonetization has strengthened the honest
middle-class taxpayers, small traders, professionals and other such
people who were bearing the brunt of corruption and black money in
day-to-day life. The BHIM app launched by our Prime Minister in the
beginning of New Year will be an important tool in this movement
towards the social, economic and political justice ensured by the
Constitution of India made by Dr Baba Sahab Ambedkar. It will also
help distribute the benefits of growth and development to all
equitably and brings in honest and transparent business in the
country, which is the need of the hour. It is believed that the
effective implementation of the policies of demonetization and digital
economy will successfully lead the country and its people towards a
developed India. Demonetization is an important step towards
establishment economic inclusion, transparent governance and equitable
society in our country. It is the transfer of black money from the tax
non-compliant to the poor and the weak. This is a moment to
congratulate the Central Government for fulfilling its promise of
providing a cleaner and strategic Economy to the Nation.
There is no iota of doubt that demonetization was taken with
full-fledged preparations and that the Government has come true to the
expectations and trust of the people of our country. This is reflected
in the series of events including the decision of forming SIT against
Black Money in the very first Cabinet Meeting of the Central Govt.
Other steps were different laws and schemes which the Govt has
introduced and implemented from time to time in last two and half
years like that of Income Declaration Scheme, Jan Dhan Scheme, Black
Money Act, Bankruptcy Insolvency Law, DRT Amendment Law, Benami
Property Act, etc. The double Taxation Avoidance Treaties with
Mauritius, Cyprus and Singapore which enabled the round tripping of
Black Money were re-written. All these acts, schemes and initiatives
are coordinated steps in the fight against the black money and
corruption in the Country.
The ADHAR Act has ensured that the poor of our country will get their
due share and it reaches to them directly. Similarly, demonetization
was necessary for decimating the parallel economy of the black money
and for smooth functioning of the GST in near future. Demonetization
has brought back the money that was lying idle outside the purview of
the Government. Today there is more money with the banks to lend as
hoarded money has been deposited in the banks. It has lost its
anonymity. The informal economy will now increasingly integrate with
the formal economy which will lead to higher revenues with States and
the Centre and ultimately will lead to bigger and cleaner GDP. We also
believes that the Country’s 107 crore mobile phone connections, 147
crore bank accounts including 117 crore savings bank accounts and 25
crore Jan Dhan accounts, 35 crore smart phones, more than 40 crore
ADHAR linked accounts and more than 75 crore debit cards make it an
‘enabled’ society for digital transactions. The Central Government has
also promoted cashless transactions through UPI, USSD, AEPS and Rupay
Card. All these steps of the Central Government are steps towards the
corruption free India.
Immediate Benefits of Demonetization:-
There were major fifteen benefits of currency demonetization which we
recently witness and is going to revolutionize the Indian economy in
the long run. We believe this will clear the air and pave the way for
a prosperous and strong India. Following are the benefits:-
1. 100% fake currency out of circulation in one stroke! This was
probably one of the greatest change that was taking place.
2. Cash to create chaos and terror lying with terrorists, maoists,
naxalites, Jihadis gone waste!
3. Hawala sources dried up for funding of terrorists, maoists,
naxalites, conversion lobby and Jihadis. As we know there is a
considerable decrease of violence in Kashmir after this decision. Once
the funding stopped, there wont be any riots in the valley and we are
already witnessing the live effect!
4. Kashmir back to normal, schools are opened, normalcy in the
valley, no schools burnt, you won’t find any stone pelters these days!
5. Banks have started mobile ATMs for Hospitals!
6. Jan Dhan accounts are fulled with money, Government started this
scheme for financial inclusion purpose, but people were reluctant to
keep money in the bank, but after demonetization started, citizens are
ready to come back to the banking network and thereby our banking
system strengthened, citizens will be the beneficiaries of financial
inclusion!
7. 55 lakh money disputes settled in one day in Lok Adalats
8. According to State Bank of India more than 3 lakh crore money,
already deposited in the banks!
9. All business men are depositing cash lying with them as current
year income with ADVANCE TAX
10. All jewellers are being issued forms to declare their GOLD stock
on day to day basis!
11. Defaulters of bank, property tax, electricity bills, telecom bills
are clearing their long pending bills.
12. Defaulters of all kind of taxes are clearing their dues!
13. Small vendors started going digital and already using APPS,
digital forms of transactions and digital wallets!
14. Fiscal deficit of INDIA SET TO REDUCE!!!
15. Business men are declaring their black money as income and paying
advance tax, we have seen many such examples in the recent days as
many of them are coming forward and declaring cash lying with them as
black money and paying taxes!
Long-Term Benefits of Demonetization:-
Though there were initial short-term costs, but in the long-term,
demonetization is sure to accrue huge benefits to the country. Spread
of cashless transaction culture, growth of the formal economy,
registration of new income tax payers, linking or accounting physical
asset investment to PAN, cleansing of the real estate sector,
conscience about avoiding black income transactions, etc., are
supposed to be the major long-term gain.
1. Rise of the cashless economy: Spread of the digital payment
culture will start the ‘formalisaton’ process in the economy. It will
reduce the use of physical cash as well. Once bulk of the economic
transactions are digitalized it will result in revealing the
expenditure made by individuals to the tax authorities especially big
transactions.
2. Growth of the formal economy will be another associated long
term gain. If additional measures like cleansing the real estate
sector and bringing all traders under the digital payment system, the
unorganised sector transaction will be made accountable. Even if it is
a slow process, bringing the informal sector into the formal economy
will reduce black money.
3. Social shake up: Black money can be eliminated only if we
eliminate the deep rooted social mentality that dealing with black
money is economically rewarding and legally feasible. Demonetization
may bring a social shake up in the country by destroying this
mentality. It will spread an attitude against black money. People will
be averse to deal with black money if they know that they are easily
traceable and harder legal steps are initiated against them. Such an
awareness and conscience can reduce the area available for the
activation of black money.
4. Demonetization will reduce the circumference available for the
activities of parallel economy: Demonetization is not an isolate arm
or not the only one against black money. It may be complemented by
several other steps. One such supportive step is making PAN compulsory
for high value transactions up to Rs 10000. Similarly, PAN
documentation should be made compulsory against all investment in
physical assets like gold, land etc. If these happens, parallel
economic activities can be reduced substantially.
5. Large number of new tax payers may appear with demonetization.
This is because demonetized money will reveal their income size and
tax officials may check them in future, compelling to pay tax.
6. Rise in financial savings: At present, more than 50% of
household savings are in physical savings like gold and land.
Significant portion of these are in black money. Now with the low
reward in the real estate and gold holdings, people may tempt to save
in financial forms like bank deposits, mutual funds etc.
7. Demonetization is a deep psychological strike on black money.
Demonetization move has killed the very motivation of those people who
have the ability to generate black money. A person who had black money
has already paid more than the effective tax rate just to convert his
black money into legally tender-able currency / assets. Such people
are in a state of shock as though they have already paid tax at a
higher effective tax rate but still their black money has not got
converted into legitimate income. To top it up their wealth has
substantially gone down as they have overnight lost more than 50%
value in their real estate holdings
8. Demonetization has killed the very motivation of that person to
generate black money and when a person loses his motivation to
generate black money it is certain that the person would not generate
black money irrespective of that person’s ability and resources
available at his hand to generate black money.
9. Demonetization would produce a lot of indirect taxes.
Demonetization has made the common man realize that he was the one who
though paid his taxes, ended up playing a big role in generation of
black money. This was because most of his spending were in cash.
Common man is street smart and with this harrowing experience he would
change his bad habit of withdrawing cash from ATM and then spending it
on purchases. Demonetization seeks to bring in a sharp, sudden but
long lasting behavior change that encourages electronic payments. That
means a lot many transactions would get reported and that would lead
to a direct increase in income taxes.
10. Demonetization has recapitalized banks in 21 days flat. The total
NPA of banking sector is Rs. 6 Lakh crore. Banks have got low cost
deposits of Rs. 11 Lakh crore and still counting. This money would not
leave the Banks as the pace of outflows would not match the inflows.
11. An aggressive RBI can now reduce base rate by 2 - 3 percentage
points that would lead to a reduction in interest burden on farm
loans, mudra loans, housing loans and corporate loans thereby
benefiting farmers, SME, middle class and Corporates.
12. Demonetization would lead to generation in employment. Government
can now lend massively to infrastructure sector through the
recapitalized Public Sector Banks. This would generate a lot of
employment opportunities thereby moving more people out of poverty.
13. Demonetization is expected to extinguish the unaccounted money in
the system and would not only reduce the liabilities of the government
but would add to its finances. This would help the government spending
on large infrastructure projects, thus pushing the capex cycle.
14. It is also expected to have a ‘habit-changing’ effect on the
Indian citizens. People would now prefer keeping cash in banks rather
than keeping it at home/lockers. This would boost bank’s CASA ratio,
reduce the cost of funds and help bank’s NI margins.
15. The move is likely to lead to better tax compliance, raise the Tax
to GDP ratio and improved tax collection. This could lead to lower
borrowing and better fiscal management. Also, with lower cash
transactions in the near term, inflation may see downtrend in the near
term.
State’s Perspectives:-
Though Arunachal Pradesh is largely peaceful and has no home-grown
terrorism as such, demonetization has greatly affected the funding to
the various terrorist groups operating from the other states and
countries. It is a fact that terror funding has been curbed which was
done with ease earlier.
To promote the Digital Economy, 840 Gram Panchayats in the State was
connected by Internet Services by the end of March 2017 and for this
the fibre optic network was laid in full swing. Govt has also extended
all possible help to the Private Mobile and Internet Service Providers
to provide mobile service in rural and remote areas of the state. This
has been possible due to the vision and personal intervention of
Hon’ble Chief Minister Pema Khandu which would ultimately be a
platform for a cashless economy in the future.
The State Govt is committed to take digital economy, transparent
governance, decisive leadership and dialogue with the common men to
win confidence of the people as envisaged by the National Executive
and the Central Govt. In this direction, the Govt has already
initiated steps passed by the Cabinet towards implementation of the
Chief Minister’s Dash Board, Ease of doing business and Direct Benefit
Transfers linked with digitisation. The government stand committed by
the decisions of the Central Leadership towards making of Modern India
where modern technique, transparent governance and equitable society
are the benchmark fulfilling the aim of ‘sabka saath – sabka vikas’
columns of Indian newspapers in 2016. The Indian government has long
struggled with the issue of the fake currency and black money. In 1946
and in 1978, the respective Indian governments turned to
demonetization as the long-term solution to the problem. The same
historical event took place at the stoke of hour on the midnight of
8th November 2016, where Central government announced demonetisation
policy. India lost 85% of high denomination currency and this topic
became moot point in every corner of India. The government has
different objectives behind this demonetization. The first and
foremost objective is to attempt to make India a corruption free
country. In his different speech on demonetization Indian Prime
Minister Narendra Modi clearly, points out that this bold step has
been taken to get a control over corruption in the country. Secondly,
it is done to curb black money, thirdly it is also a step to control
escalating price rise, fourth to stop fund flow to illegal activity.
The Hon’ble Prime Minister Shri Narendra Modi ji had to take the bold
decision to tackle many issues like parallel economy, counterfeit,
currency in circulation and terror funding. Initially, implementation
of demonetization in a populous country like India was not a cakewalk
for the government. The sudden declaration of demonetization in the
country had created lots of chaos and confusion among the common
people of the country, but gradually everything became normal.
Some of the benefits of this policy were to curb corruption and
accumulation of black money with one major benefit - economy moving
towards the cashless and digital economy. Some Impediments in
implementation like crash less banks & ATMs and trust issues in
digital transaction created hue and cry at ground level. Small
vendors, farmers, daily wages, trader etc suffered a lot as India is
largely a cash economy. Case transaction in our economy are far more
than the total number of electronics transactions.
Government had done tremendous job by replenishing the cash in very
short time and assured people who have lawful money not to worry.
Steps such as deploying POS machines, law with strong liability
clauses, providing digital infrastructure etc could have made it easy
for small merchants.
However Instead of making it political issue, everybody should look
into long run. Economy is slowly moving to cashless transaction. This
policy has long term potential which will fetch good result in long
term and should be supported by all.
What is Demonetization?
The discontinuity of a particular currency from circulation and a
replacement of it with a new currency has been termed as
Demonetization. In the present setting, it is the restricting of the
500 and 1000 section money notes as a lawful delicate. In other words,
it can also be said that a demonetization is an act of stripping a
currency unit of its status as legal tender. It occurs when a
particular form of money is pulled from circulation and a new note or
coin is introduced in the market as a replacement of withdrawn form of
money.
National Perspective:
The credit on successful and credible implementation of demonetization
goes to Hon’ble Prime Minister, Shri Narendra Modi ji who took the
historic decision of demonetization in the country. It is a very bold
decision towards economic reform in the country. The state govt under
the leadership of Chief Minister, Shri Pema Khandu fully supported and
stood behind the Central Leadership on its fight on black money and
fake currency which will go a long way in rooting out the evils of
corruption and terrorism. The Hon’ble Union Finance Minister, Arun
Jaitley ji in his speech during Vibrant Gujarat Summit, has also
mentioned that India was one of the five most fragile economies in the
world till recently. It can be now firmly belief that demonetization
has only made the economic position of the country stronger.
While it is seen in world over that advance countries are struggling
for a cashless economy, our great nation under the leadership of
Hon’ble Prime Minister Narendra Modi ji has already started rigorous
steps in this direction despite having only 2% digitised economy until
recently. Undoubtedly, Demonetization is a historic and an important
step towards economic inclusion, transparent governance and equitable
society in remaking of a strong India. The Government has ended any
role of and kind of middlemen from its beneficiary schemes like
MNREGA, financial assistance to poor students and subsidies to
marginal sections including SC/ST/OBC through digital transactions and
Direct Benefit Transfer. It also believes that the acts like
Industrial Disputes Act, Minimum Wages Act, Payment of Bonus Act,
Factory Act, Contract Labour Act will ensure justice for the poorer
sections of our society. The Amendment in Payment of Wages Act brought
in the Central Government is one of the most important steps towards
the welfare of the labour and workers of this country. It will
immensely benefit the poor workers employed and engaged largely in
sectors like Tea, Coffee, Rubber etc as daily wage earners.
Demonetization linked with the Digitization has curbed the menace of
under-payment as the employers are bound to pay wages as per minimum
prescribed norms with transparency in payments.
The decision of demonetization has strengthened the honest
middle-class taxpayers, small traders, professionals and other such
people who were bearing the brunt of corruption and black money in
day-to-day life. The BHIM app launched by our Prime Minister in the
beginning of New Year will be an important tool in this movement
towards the social, economic and political justice ensured by the
Constitution of India made by Dr Baba Sahab Ambedkar. It will also
help distribute the benefits of growth and development to all
equitably and brings in honest and transparent business in the
country, which is the need of the hour. It is believed that the
effective implementation of the policies of demonetization and digital
economy will successfully lead the country and its people towards a
developed India. Demonetization is an important step towards
establishment economic inclusion, transparent governance and equitable
society in our country. It is the transfer of black money from the tax
non-compliant to the poor and the weak. This is a moment to
congratulate the Central Government for fulfilling its promise of
providing a cleaner and strategic Economy to the Nation.
There is no iota of doubt that demonetization was taken with
full-fledged preparations and that the Government has come true to the
expectations and trust of the people of our country. This is reflected
in the series of events including the decision of forming SIT against
Black Money in the very first Cabinet Meeting of the Central Govt.
Other steps were different laws and schemes which the Govt has
introduced and implemented from time to time in last two and half
years like that of Income Declaration Scheme, Jan Dhan Scheme, Black
Money Act, Bankruptcy Insolvency Law, DRT Amendment Law, Benami
Property Act, etc. The double Taxation Avoidance Treaties with
Mauritius, Cyprus and Singapore which enabled the round tripping of
Black Money were re-written. All these acts, schemes and initiatives
are coordinated steps in the fight against the black money and
corruption in the Country.
The ADHAR Act has ensured that the poor of our country will get their
due share and it reaches to them directly. Similarly, demonetization
was necessary for decimating the parallel economy of the black money
and for smooth functioning of the GST in near future. Demonetization
has brought back the money that was lying idle outside the purview of
the Government. Today there is more money with the banks to lend as
hoarded money has been deposited in the banks. It has lost its
anonymity. The informal economy will now increasingly integrate with
the formal economy which will lead to higher revenues with States and
the Centre and ultimately will lead to bigger and cleaner GDP. We also
believes that the Country’s 107 crore mobile phone connections, 147
crore bank accounts including 117 crore savings bank accounts and 25
crore Jan Dhan accounts, 35 crore smart phones, more than 40 crore
ADHAR linked accounts and more than 75 crore debit cards make it an
‘enabled’ society for digital transactions. The Central Government has
also promoted cashless transactions through UPI, USSD, AEPS and Rupay
Card. All these steps of the Central Government are steps towards the
corruption free India.
Immediate Benefits of Demonetization:-
There were major fifteen benefits of currency demonetization which we
recently witness and is going to revolutionize the Indian economy in
the long run. We believe this will clear the air and pave the way for
a prosperous and strong India. Following are the benefits:-
1. 100% fake currency out of circulation in one stroke! This was
probably one of the greatest change that was taking place.
2. Cash to create chaos and terror lying with terrorists, maoists,
naxalites, Jihadis gone waste!
3. Hawala sources dried up for funding of terrorists, maoists,
naxalites, conversion lobby and Jihadis. As we know there is a
considerable decrease of violence in Kashmir after this decision. Once
the funding stopped, there wont be any riots in the valley and we are
already witnessing the live effect!
4. Kashmir back to normal, schools are opened, normalcy in the
valley, no schools burnt, you won’t find any stone pelters these days!
5. Banks have started mobile ATMs for Hospitals!
6. Jan Dhan accounts are fulled with money, Government started this
scheme for financial inclusion purpose, but people were reluctant to
keep money in the bank, but after demonetization started, citizens are
ready to come back to the banking network and thereby our banking
system strengthened, citizens will be the beneficiaries of financial
inclusion!
7. 55 lakh money disputes settled in one day in Lok Adalats
8. According to State Bank of India more than 3 lakh crore money,
already deposited in the banks!
9. All business men are depositing cash lying with them as current
year income with ADVANCE TAX
10. All jewellers are being issued forms to declare their GOLD stock
on day to day basis!
11. Defaulters of bank, property tax, electricity bills, telecom bills
are clearing their long pending bills.
12. Defaulters of all kind of taxes are clearing their dues!
13. Small vendors started going digital and already using APPS,
digital forms of transactions and digital wallets!
14. Fiscal deficit of INDIA SET TO REDUCE!!!
15. Business men are declaring their black money as income and paying
advance tax, we have seen many such examples in the recent days as
many of them are coming forward and declaring cash lying with them as
black money and paying taxes!
Long-Term Benefits of Demonetization:-
Though there were initial short-term costs, but in the long-term,
demonetization is sure to accrue huge benefits to the country. Spread
of cashless transaction culture, growth of the formal economy,
registration of new income tax payers, linking or accounting physical
asset investment to PAN, cleansing of the real estate sector,
conscience about avoiding black income transactions, etc., are
supposed to be the major long-term gain.
1. Rise of the cashless economy: Spread of the digital payment
culture will start the ‘formalisaton’ process in the economy. It will
reduce the use of physical cash as well. Once bulk of the economic
transactions are digitalized it will result in revealing the
expenditure made by individuals to the tax authorities especially big
transactions.
2. Growth of the formal economy will be another associated long
term gain. If additional measures like cleansing the real estate
sector and bringing all traders under the digital payment system, the
unorganised sector transaction will be made accountable. Even if it is
a slow process, bringing the informal sector into the formal economy
will reduce black money.
3. Social shake up: Black money can be eliminated only if we
eliminate the deep rooted social mentality that dealing with black
money is economically rewarding and legally feasible. Demonetization
may bring a social shake up in the country by destroying this
mentality. It will spread an attitude against black money. People will
be averse to deal with black money if they know that they are easily
traceable and harder legal steps are initiated against them. Such an
awareness and conscience can reduce the area available for the
activation of black money.
4. Demonetization will reduce the circumference available for the
activities of parallel economy: Demonetization is not an isolate arm
or not the only one against black money. It may be complemented by
several other steps. One such supportive step is making PAN compulsory
for high value transactions up to Rs 10000. Similarly, PAN
documentation should be made compulsory against all investment in
physical assets like gold, land etc. If these happens, parallel
economic activities can be reduced substantially.
5. Large number of new tax payers may appear with demonetization.
This is because demonetized money will reveal their income size and
tax officials may check them in future, compelling to pay tax.
6. Rise in financial savings: At present, more than 50% of
household savings are in physical savings like gold and land.
Significant portion of these are in black money. Now with the low
reward in the real estate and gold holdings, people may tempt to save
in financial forms like bank deposits, mutual funds etc.
7. Demonetization is a deep psychological strike on black money.
Demonetization move has killed the very motivation of those people who
have the ability to generate black money. A person who had black money
has already paid more than the effective tax rate just to convert his
black money into legally tender-able currency / assets. Such people
are in a state of shock as though they have already paid tax at a
higher effective tax rate but still their black money has not got
converted into legitimate income. To top it up their wealth has
substantially gone down as they have overnight lost more than 50%
value in their real estate holdings
8. Demonetization has killed the very motivation of that person to
generate black money and when a person loses his motivation to
generate black money it is certain that the person would not generate
black money irrespective of that person’s ability and resources
available at his hand to generate black money.
9. Demonetization would produce a lot of indirect taxes.
Demonetization has made the common man realize that he was the one who
though paid his taxes, ended up playing a big role in generation of
black money. This was because most of his spending were in cash.
Common man is street smart and with this harrowing experience he would
change his bad habit of withdrawing cash from ATM and then spending it
on purchases. Demonetization seeks to bring in a sharp, sudden but
long lasting behavior change that encourages electronic payments. That
means a lot many transactions would get reported and that would lead
to a direct increase in income taxes.
10. Demonetization has recapitalized banks in 21 days flat. The total
NPA of banking sector is Rs. 6 Lakh crore. Banks have got low cost
deposits of Rs. 11 Lakh crore and still counting. This money would not
leave the Banks as the pace of outflows would not match the inflows.
11. An aggressive RBI can now reduce base rate by 2 - 3 percentage
points that would lead to a reduction in interest burden on farm
loans, mudra loans, housing loans and corporate loans thereby
benefiting farmers, SME, middle class and Corporates.
12. Demonetization would lead to generation in employment. Government
can now lend massively to infrastructure sector through the
recapitalized Public Sector Banks. This would generate a lot of
employment opportunities thereby moving more people out of poverty.
13. Demonetization is expected to extinguish the unaccounted money in
the system and would not only reduce the liabilities of the government
but would add to its finances. This would help the government spending
on large infrastructure projects, thus pushing the capex cycle.
14. It is also expected to have a ‘habit-changing’ effect on the
Indian citizens. People would now prefer keeping cash in banks rather
than keeping it at home/lockers. This would boost bank’s CASA ratio,
reduce the cost of funds and help bank’s NI margins.
15. The move is likely to lead to better tax compliance, raise the Tax
to GDP ratio and improved tax collection. This could lead to lower
borrowing and better fiscal management. Also, with lower cash
transactions in the near term, inflation may see downtrend in the near
term.
State’s Perspectives:-
Though Arunachal Pradesh is largely peaceful and has no home-grown
terrorism as such, demonetization has greatly affected the funding to
the various terrorist groups operating from the other states and
countries. It is a fact that terror funding has been curbed which was
done with ease earlier.
To promote the Digital Economy, 840 Gram Panchayats in the State was
connected by Internet Services by the end of March 2017 and for this
the fibre optic network was laid in full swing. Govt has also extended
all possible help to the Private Mobile and Internet Service Providers
to provide mobile service in rural and remote areas of the state. This
has been possible due to the vision and personal intervention of
Hon’ble Chief Minister Pema Khandu which would ultimately be a
platform for a cashless economy in the future.
The State Govt is committed to take digital economy, transparent
governance, decisive leadership and dialogue with the common men to
win confidence of the people as envisaged by the National Executive
and the Central Govt. In this direction, the Govt has already
initiated steps passed by the Cabinet towards implementation of the
Chief Minister’s Dash Board, Ease of doing business and Direct Benefit
Transfers linked with digitisation. The government stand committed by
the decisions of the Central Leadership towards making of Modern India
where modern technique, transparent governance and equitable society
are the benchmark fulfilling the aim of ‘sabka saath – sabka vikas’
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