PM Modi said demonetization has helped improve tax collection.
New Delhi:
Four years after announcing a surprise move to replace nearly 86% of all India’s cash remittances that send shock waves through the economy that has not yet fully recovered, the Prime Minister Narendra Modi defended the move on Sunday, saying it had reduced corruption and increased transparency.
On November 8, 2016, with four hours’ notice, PM Modi announced the decision to ban Rs 500 and Rs 1000 tickets from midnight.
People lined up for weeks at ATMs and banks to withdraw new banknotes that were rationed, plunging businesses into chaos.
In a famous speech, he asked people to endure the pain for 50 days and if the situation did not improve, he said, he was ready for “any punishment”.
It took people months to get the cash they needed, and India’s annual economic growth fell from 8.25% in 2016 to 5.02% in 2019, according to the World Bank.
On Sunday, on the fourth anniversary of the ruling, PM Modi tweeted:
Demonetization has helped reduce black currency, increase tax compliance and formalization, and increase transparency.
These results have been very beneficial for national progress. #DeMolishingCorruptionpic.twitter.com/A8alwQj45R
– Narendra Modi (@narendramodi) November 8, 2020
Initially touted as a silver bullet to wipe out everything from ill-gotten wealth to terrorism, demonetization was widely viewed by economists as a major mistake.
Intended to wipe out black money, the Indian Reserve Bank said 99.30% of all banned banknotes managed to get back into their system.
The government, however, stubbornly defended the move, even in the face of scorching criticism from the opposition.
The ruling BJP said on Sunday that the demonetization was an “attack” on the corruption and black money that were rampant during the “lost decade” of the congressional-led UPA government.
This has resulted in the consolidation of the economy, the formalization of the informal sector and the aggregation of income, said BJP spokesman Rajeev Chandrasekhar.
Congress leader Rahul Gandhi proposed a different approach, saying the move was aimed at helping some of PM Modi’s “crony capitalist friends” and “destroying” the Indian economy.
