Demonetisation Has Made the Economy Cleaner: Niti Aayog Dy Chief

Decrying any negative impact of the government’s demonetisation move, Niti Aayog Vice-Chairman Rajiv Kumar told BloombergQuint that the policy has instead brought about a “more formal, cleaner, tax-compliant economy.”

Demonetisation has not had a negative impact. It is a false narrative. We now have a more formal, cleaner, tax-compliant economy.

Kumar further lauded demonetisation, by stating that it had encouraged a growth in tax base and tax collections, while also ensuring that there was “no high-level corruption in government deals.”

Niti Aayog Deputy Chief Blames Raghuram Rajan For Slow GDP Growth

Kumar had, on 3 September, blamed former Reserve Bank of India governor, Raghuram Rajan for a succession of declining GDP growth rate over the last three years.

This comes at a time when the GDP growth rate for the first quarter of 2018-19 was at its highest in the last three years.

The declining trend for the last six quarters starting 2015-16, when the growth rate was as high as 9.2 per cent, was not a result of demonetisation. The growth was declining because of the rising NPAs in the banking sector. When this (Narendra Modi) government came to office, that figure was about Rs 4 lakh crore. It rose to Rs 10.5 lakh crore by the middle of 2017, because under the previous RBI governor Mr (Raghuram) Rajan, they had instituted a new mechanism to identify stressed NPAs.

Rajiv Kumar, Niti Aayog Vice-Chairman

Adding that there was no evidence to establish a link between the economic slowdown and demonetisation, Kumar said, “This (decline in growth) was just simply in continuation of a trend and not because of the shock of demonetisation as has been claimed. I think there is no evidence to prove that there was a direct link between demonetisation and slowdown in the growth rate.”

Speaking about the recent RBI’s report on demonetisation, Kumar assured that there has been an increase in the filing of income tax returns. He also reiterated that demonetisation had intensified the crackdown on black money and benami transactions in the economy.

The RBI in its report stated that Rs.13,000 had not returned to the economy. Apart from this, Rs. 23,942 crore has been seized by tax authorities, which adds up to Rs.36,000 crores. Around 18 lakh suspicious accounts are being scrutinised. In total, we expect another Rs. 1.5 lakh crore to return to the economy. Demonetisation has helped keep corruption in check.

Rajiv Kumar, Niti Aayog Vice-Chairman

According to the RBI report, Rs 15.31 lakh crore worth demonetised currency notes have now been returned, since 8 November, 2016. This represents about 99.3 percent of the total currency notes which went out of circulation on a single day.