New Delhi: Lauding the government’s surprise demonetisation move, Finance Minister Arun Jaitley on Friday said that it has attacked India’s parallel economy that was running outside the banking system for the last 70 years and a “new normal” will become the way for the country.
“Shadow or parallel economy had become a way of life. When you have a large chunk of currency outside the banking system, taxation system is narrow, because shadow economy becomes a way of life. Demonetisation redefines that,” Jailtey said at the India Economic Conclave organised by ET Now here.
“Demonetisation move will set a new normal for the economy. We see good, steady economic growth in coming years. We expect India to be a large digital economy in coming years,” he added.
“Formally, the high denomination currency has ceased to be a legal tender. We now move to a situation where farmer receives money from trader through electronic mode. In five to eight years down the road, it is going to be a normal,” he said.
Rebutting the allegations of bad implementation of the demonetization plan, Jaitley said that it could not have been done in a better way than this.
“On the execution part, I don’t think this could have executed better than it is being done now. You are replacing 86 per cent of India’s currency without any social disruptions within a couple of weeks. A substantial amount of currency has to be printed in advance. It takes years because of the specialization involved and to keep it all a secret,” he said.
Jaitley said that though the move is bound to cause initial inconvenience, in the long run it will be welcomed by all, including traders.
“At the end of the day, Indian shopkeeper, traders will also realise that formal official trade is a superior way of doing business than the shadow economy. It brings everyone in the cleaner system of economy and will be welcomed by all in the long run,” he added.
Jaitley said that demonetization will also help India move towards a zero-deficit budget.
“If everyone honestly pays the taxes, there will be no deficit budget, enough money to invest in rural areas,” he said.
Promising increased ability of the government to support the economic activity, more money for infrastructure, manufacturing and informal sector, he said, “The move has suddenly improved the lending ability of the banks.”
“If we go on the track and follow the roadmap, India will have better infrastructure, a larger manufacturing base, reduced poverty, more job creation. We have to change the way India spends. That is the effort of the entire exercise (demonetization),” he added.