Jaitley says demonitization led to formalization of economy after RBI report

Finance Minister Arun Jaitley today said the demonetization of Rs 500/1,000 notes led to the formalization of the economy, more tax collection, and higher growth.

His statement comes a day after RBI data revealed that almost all the scrapped notes were returned to banks.

He said the Reserve Bank has twice released its reports stating that the demonetized notes Rs 500 and Rs 1,000 have been substantially deposited in the banks.

"A widely stated comment has been that just because most of the currency came back into the banks, the object of demonetization has not succeeded.

"Was the invalidation of the non-deposited currency the only object of demonetization? Certainly not," Jaitley said in a blog.

The larger purpose of demonetization was to move India from a tax non-compliant society to a tax-compliant society, he said adding this necessarily involved formalization of the economy and a blow to the black money.

"This is the positive impact of demonetization. More formalization of the economy, more money in the system, higher tax revenue, higher expenditure, higher growth after the first two quarters," the Finance Minister said.

Jaitley said the growth of Income Tax collections in the pre-demonetisation two years was 6.6 percent and 9 percent.

Post-demonetisation, the collections increased 15 percent and 18 percent in the next two years.

"The same trend is visible in the third year," he said.

In March 2014, the number of Income Tax (IT) returns filed was 3.8 crore.

In 2017-18, the number has grown to 6.86 crores.

In the last two years, when the impact of demonetization and other steps are analyzed, the IT returns have increased 19 percent and 25 percent, Jaitley noted.

On November 8, 2016, Prime Minister Narendra Modi announced the demonetization of high-value currency notes. Of the Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes in circulation on November 8, 2016, notes worth Rs 15.31 lakh crore have been returned to the banks.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)