A day after the Reserve Bank of India’s (RBI’s) annual report stated that 99 per cent of high-value demonetised notes had come back into the system, the Narendra Modi government ramped up its outreach on traditional and social media in defence of demonetisation. The finance ministry said it was still hopeful of a higher dividend payment from the RBI in FY18.
Meanwhile, the Central Board of Direct Taxes (CBDT) issued additional information on black money, and said that about 14,000 properties, worth over Rs 1 crore each, were under its scrutiny, as their owners had not filed income returns.
Senior government ministers and bureaucrats gave statements or held press conferences. On Twitter, #DemonetisationSuccess was trending in India, and almost all ministers in Modi’s Council sent out tweets under this, which were retweeted by the Centre’s Press Information Bureau.
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In the morning, Finance Minister Arun Jaitley said that a large amount of previously unaccounted wealth had come back into the banking system and hence, the anonymity of those who owned black money had now ended.
“It was clear that an overwhelmingly large amount of black money has come back into banking system, something that was of consequence to us in the government,” Jaitley said at an event organised by The Economist in New Delhi on Thursday.
“As demonetisation progressed and the monies were deposited, it was quite clear that people have found the ways and the means, legitimately or otherwise, to get the money into the banking system, irrespective of the consequences they will face later,” he said.
The minister said that while it was natural for there to be speculation on how much money has come back, the fallout from demonetisation was along predicted lines, in that more and more people have now been compelled to come into the tax net.
“It means that the anonymity around the money, which was otherwise floating in the system, has come to an end. The money got identified with the owner. And henceforth he was fixed with explaining the liability of the money,” Jaitley said.
On Wednesday, the RBI disclosed that only one per cent of the Rs 15.44 lakh crore worth of currency notes that had been scrapped in November last year had not come back to the central bank. Almost 99 per cent, or Rs 15.28 lakh crore of demonetised notes, had returned as of June 30.
Jaitley had then attacked the critics of demonetisation and said that notes returning to the system were not a parameter to judge demonetisation. “The real objective of demonetisation was formalisation, attack on black money, less cash currency, bigger tax base, digitisation, and a blow to terrorism. And we do believe that in each of these areas, the effect of digitisation has been extremely positive,” he had said at a media briefing on Wednesday evening.
Later in the day, Economic Affairs Secretary Subhash Chandra Garg said that the Centre was discussing the possibility of additional surplus from the RBI, post-demonetisation.
“The RBI has calculated a surplus of Rs 44,000 crore, and has transferred Rs 30,600 crore to the government. We are discussing with the RBI whether there is scope for more transfer, as we have our Budget Estimate (BE) at Rs 58,000 crore. For the (RBI’s) financial year 2016-17, we are discussing whether some more transfer of surplus can come from there,” Garg said at a press conference.
The RBI’s financial year runs from July to June. Hence, its surplus, or dividend, for 2016-17, is part of the Centre’s 2017-18 non-tax revenue. The 2017-18 BE for dividends from state-owned banks, financial institutions, and the RBI combined stand at around Rs 74,900 crore, from which the RBI’s share is Rs 58,000 crore.
Garg said that the Centre, in fact, was expecting most of the demonetised currency to come back. “The Centre never said that it expects any currency not to come back. I don’t think the government ever made any statement in Parliament or otherwise or as part of an affidavit,” Garg said. When asked about the then Attorney General Mukul Rohatgi’s statement in court that Rs 4-5 lakh crore was not expected to come back, Garg said that was just an opinion.
On the day April-June quarter gross domestic product (GDP) showed that the economy grew 5.7 per cent, the lowest during Narendra Modi’s tenure, Garg said that the note ban and implementation of the goods and service tax had impacted economic activities in the past six-seven months. “From the next quarter onwards, we would see the positive implication and impact of these two measures on GDP growth. We are sitting in a quarter where we would be turning the corner.”
Power Minister Piyush Goyal, meanwhile told news agency ANI, the demonetisation had been a success. “I’d like to congratulate Prime Minister Narendra Modi for attacking black money the way they did and making it clear that this government won’t spare anyone in possession of black money. It took us three years to get rid of this black money,” he said. NITI Aayog Vice-Chairman Rajiv Kumar, at an editors round table to discuss the efficacy of the demonetisation drive, said he fully endorsed the note ban. When asked if the drive inflicted more pain than gain, Kumar said, “There are some conjectures about a one per cent drop in GDP, but that is not pain.” When asked if demonetisation was an economically viable move, Kumar said it has helped bring down both inflation and real estate rates.
On social media, the likes of Goyal, Rail Minister Suresh Prabhu, Chemicals, Fertilizers and Parliamentary Affairs Minister Ananth Kumar, Textiles and Information and Broadcasting Minister Smriti Irani, Minister of State for Civil Aviation Jayant Sinha, Minister of State for Finance Arjun Meghwal, and a host of other Cabinet and Council members spoke in support of Modi’s November 8 currency purge. The ministers and government departments quoted the Centre’s efforts to increase digital transactions, bring in more people under the tax net, and fight unaccounted wealth.
The CBDT said that it had identified 1.3 million accounts of some 972,000 people with unusual cash deposits of around Rs 2.89 lakh crore and sought their response. It did not, however, give details of tax collected on unaccounted wealth.
After the note ban, there has been a 158 per cent increase in the number of searches (from 447 to 1,152 groups) and more than doubling of seizures to Rs 1,469 crore, from Rs 712 crore. There also has been 38 per cent increase in admission of undisclosed income (from Rs 11,226 crore to Rs 15,496 crore), it said.
The income-tax (I-T) department said the number of e-returns of individual taxpayers filed till due date of August 5 increased to 27.9 million, from 22.2 million returns filed during the corresponding period last year. “This shows a marked improvement in the level of voluntary compliance as a result of action taken by the I-T department on the basis of the data of cash deposits in the wake of demonetisation,” it said.