Demonetisation has had a real impact on the financing of terrorists and insurgents, Finance Minister Arun Jaitley said on Wednesday. The number of people throwing stones in Jammu and Kashmir has reduced drastically since the note ban.
“The reduction in terror financing [due to demonetisation] is clear,” Mr. Jaitley said in an interview to Doordharshan. “All security agencies in Chhattisgarh and J&K say that insurgents face a shortage of cash and so are finding it difficult to carry on their activities. In J&K, this was very clear. Since the demonetisation, the number of stone-throwers is almost non-existent. Where 5,000 people would come, now barely 100 come. In Chhattisgarh, the situation is similar.”
Black money
Mr. Jaitley said the government was not planning to introduce another window for declaration of black money. He did not categorically say that the ₹2,000 note would remain. Instead, he said a decision would be taken after discussions between the Reserve Bank of India and the government.
“Demonetisation was the beginning of a process to change the way we do things,” Mr Jaitley said. “The older way was not working… Up to now, if we were to buy something, then it was with black money. If we did business, then we made two types of account books. We tried in every way to not pay tax. If we need to create a strong army, help the poor, where do we get resources? And if the person with resources hides it, then it is injustice that it can’t be used for the poor. So we needed to change this.
Cash-GDP ratio
The Finance Minister said how he would like the RBI to further reduce the cash to GDP ratio from the current 9%. The ratio had fallen from 12% pre-demonetisation. “There is no need to be reliant on cash. Even if it becomes 6%, the formal economy and digitisation would increase. After demonetisation, the number of people putting their money in mutual funds increased and the number of people buying insurance increased.”
He said the weaknesses of cash were many, since it was used as an instrument for bribery and to finance terrorism.
“It’s not as if this would all end with one announcement from the Prime Minister. But it was a step that brought the issue to the centre stage,” Mr. Jaitley said. “Taxpayers’ numbers increased, digital modes of payments increased and terrorist funding was squeezed. The start towards this has been very successful.”
Opposition criticism
Mr. Jaitley also took on the Opposition for its criticism of demonetisation. The real corruption, he said, took place under their leadership. “The people who called it ‘loot,’ I think they use the term wrongly. Loot is associated with corruption. Corruption happened in 2G, in CWG and in coal block allocations. They could call that loot. But to say that putting a stop to black money and encouraging white transactions is loot, I think they don’t understand what loot means.”
Former Prime Minister Manmohan Singh had said on Tuesday that demonetisation was ‘organised loot and legalised plunder.’