Demonetisation is one year old. On November 8, 2016, the Narendra Modi Government introduced its most radical fiscal reform by abruptly withdrawing currency notes of `1000 and `500 denomination. The surgical strike by the NDA regime was lauded by fiscal experts and global financial agencies. It was a great risk, both political and economic, which only a statesman like Narendra Modi could dare take. Now, the nation along with the rest of the world is assessing its impact on the country’s economy and polity.
Demonetisation came like a bolt from the blue.
The nation was informed by the Prime Minister through his country wide broadcast a few hours before the cancellation of the high denomination currency notes which accounted for 86 pc of the total currency notes in circulation. The most hit were those with black money. The Opposition spread confusion among the people by an organised misinformation campaign.
Except for isolated agitation in some parts of the country, the people ignored the anti-demonetisation campaign and rallied behind the government. India stood by the PM in the greatest ever economic reform since Independence. Contrary to the projections of the prophets of doom, the BJP reaped great political dividends, sweeping polls in states like UP.
Demonetisation did hit black money. The blow to terrorism and extremism which were thriving under black money was deadly. The country’s financial system was cleansed and made transparent. Benami assets worth `1626 crore have been either seized or attached in the last one year. Undisclosed income worth `29,213 crore was either detected or admitted to. A `4,000 crore fraud by shell companies was detected. Over two lakh shell companies were forced to down shutters.
Many of these shell firms had more than 100 accounts each. Significantly, the increase in tax compliance was unprecedented. There was phenomenal increase in income tax collection Over 16,000 crore did not come back to banks before the deadline set for return of demonetised currency notes. Counterfeit currency worth crores was seized.
The effects of demonetisation are both short term and long term. The immediate impact has already begun to be experienced in the economy. Demonetisation will, no doubt, herald the new dawn of Indian economy. Let us wait to welcome the dawn.
(The views expressed by the author are his own)