Whether two years after demonetisation came into effect on November 8, 2016 benefited or otherwise, Quoting and counter Quoting are on. The BJP-led government continues to defend the move meant to “wipe out illegal money” while the Opposition terms the step as “ill-advised” and “Tughlaqi”. On this moment being a student of Economics my part and parcel duty is to assess the impact of Demonetisation after two years as neutral evaluator.
Every decision has some positive and negative effects, so is for de-monetisation step taken by the government Democratisation changed poor peoples faith and pushed them into problems but also it is to look helpful. The tax base has increased but the volume of business in the local market is considerably affected.
In my opinion, the biggest achievement of demonetisation has been that it has helped the government in tracking black money. The government claimed that large sums of black money were kept hidden by tax evaders and demonetisation has helped it uncover the huge amount of unaccounted cash.
Major advantages is that large number of people started using digital Transactions. Beginning of Less Cash appears to make sense in people at large. Two years after note ban, digital transactions showed robust growth Two years later, the Reserve Bank of India (RBI) in its annual report said all payment and settlement systems – NEFT, IMPS, UPI, NACH, card payments, Electronic Clearing Systems as well as Forex and market clearing systems – have seen a 44.6 percent increase in volume in 2017-18 and an 11.9 percent increase in the value of funds transferred.
As per data available with the RBI and National Payments Corporation of India (NPCI), the increase in digital payments has been profound in popular channels such as National Electronic Fund Transfer (NEFT) and mobile banking between September 2016 and September 2018. The value of NEFT transactions had gone up from INR 988,000 crore in September 2016 (just two months before demonetisation) to INR 14,182,000 crore in September 2017, and to INR 18,015,000 crore in September 2018. The value of mobile banking transactions, too, shot up from INR 2,700 crore in September 2015 to INR 104,300 crore in 2016, and to INR 186,200 crore in 2017. Altogether, there has been a 440 per cent increase since demonetisation
India’s tax base is growing but buoyancy still low While the number of individuals declaring income above Rs 1 crore increased about 68%, to 81,344 for the assessment year 2017-18 from 48,416 in assessment year 2015-16, direct tax as percentage of GDP grew marginally, from 5.62% to 5.57%, and direct tax buoyancy remained flat at around 1.2%. The total number of taxpayers declaring income of more than Rs 1 crore, including companies, rose over 58% from 88,649 in 2013-14 to 1,40,139 in 2016-17. Data from the Central Board of Direct Taxes (CBDT) show that the tax base has grown significantly, from 5.3 crore in assessment year 2013-14 to 7.4 crore in assessment year 2017-18. The number of persons filing return of income increased 65%, from 3.31 crore in FY14 to 5.43 crore in FY18.
Two years after demonetisation was announced, rendering 86% of currency in the system invalid, the big impact seems to have been on rural India in two ways – one, the relative erosion of rural agricultural wages; and two, the fall in bargaining power of farmers in receiving an attractive price for their produce. Both may have contributed to the crisis in many parts of rural India.
Demonetisation ended the short-lived recovery in rural wages under the present government Another indicator can be used to test this thesis. Food items are the main product offered by the rural economy to the urban economy. So, a higher food inflation means that the rural economy gains vis-à-vis the urban economy. According to the Report of RBI, The effect of Demonetisation has negative effect on GDP and India is still struggling to create jobs. But it does not mean that demonetisation has proved as bane. In the long run, it will prove as boon.
Mithilesh Kumar Sinha
