prasad1
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The Finance Ministry also claims to investigate a vast number of suspicious cash deposit transactions reported by the banking system. Using the advance data analytics tools, the income tax department has identified 556000 individuals whose tax profiles are found inconsistent with the money deposited by them during the demonetization period. Given the limited manpower with the income tax department, investigating such a large number of new cases is not going to be an easy task.
Furthermore, the manner in which Indian tax authorities have handled the recent cases of tax evasion inspire little confidence. Take the case of leaked Panama Papers which were released last year. The Indian tax authorities have yet to net a “big fish” listed in Panama Papers. There are more than 500 Indians named in the Panama Papers but the tax authorities have made little progress on that front.
A larger point is that some of the purported long-term gains such as investigation of suspicious transactions and widening of tax base could be well pursued without demonetization which disrupted the economy activity and caused severe hardship to common man. The income tax and other authorities have all the necessary policy instruments at their disposal to use them in the pursuit of these objectives.
At What Cost?
Some of the economic and social costs of the demonetization decision are summarized below:
· India’s GDP growth slipped to a three-year low of 5.7% in the first quarter (April-June) of fiscal 2017-18. The disruption caused by demonetization played a role in the slowdown along with other factors such as GST (goods and services tax) destocking.
· Demonetization had a debilitating impact on India’s vast informal sector, which employs more than 90 percent of country’s workforce. The cash crunch badly affected the daily wage labourers, street vendors and informal sector workers who rely solely on cash for income and expenditure. There are several reports highlighting the massive job losses in the labour-intensive sectors in the aftermath of demonetization.
· Consumer confidence fell sharply during demonetization. The much anticipated pickup in discretionary consumer spending has not been observed despite remonetization.
· Credit growth witnessed a historic low of 5.1 percent during the second half of 2016-17. In particular, bank loans to rural areas were badly affected as the growth in rural loans plummeted to 2.5 percent.
· As part of remonetization of currency notes, the RBI had to incur massive expenditure on the printing of new currency notes. The costs of printing new notes were Rs 79,650 million, about 133% higher than the previous year. It also contributed to the decline in the RBI’s surplus payable to the central government from Rs 658,760 million in 2015-16 to Rs 306,590 million in 2016-17.
· The poor execution of demonetization move resulted in long queues outside bank branches as people waited for hours to deposit and exchange the demonetized notes.
To conclude, the government needs to explain why it pursued a shock and awe strategy through demonetization when it already has a wide variety of policy instruments to achieve same objectives?
http://www.countercurrents.org/2017/09/13/has-demonetization-achieved-its-stated-objectives/
Furthermore, the manner in which Indian tax authorities have handled the recent cases of tax evasion inspire little confidence. Take the case of leaked Panama Papers which were released last year. The Indian tax authorities have yet to net a “big fish” listed in Panama Papers. There are more than 500 Indians named in the Panama Papers but the tax authorities have made little progress on that front.
A larger point is that some of the purported long-term gains such as investigation of suspicious transactions and widening of tax base could be well pursued without demonetization which disrupted the economy activity and caused severe hardship to common man. The income tax and other authorities have all the necessary policy instruments at their disposal to use them in the pursuit of these objectives.
At What Cost?
Some of the economic and social costs of the demonetization decision are summarized below:
· India’s GDP growth slipped to a three-year low of 5.7% in the first quarter (April-June) of fiscal 2017-18. The disruption caused by demonetization played a role in the slowdown along with other factors such as GST (goods and services tax) destocking.
· Demonetization had a debilitating impact on India’s vast informal sector, which employs more than 90 percent of country’s workforce. The cash crunch badly affected the daily wage labourers, street vendors and informal sector workers who rely solely on cash for income and expenditure. There are several reports highlighting the massive job losses in the labour-intensive sectors in the aftermath of demonetization.
· Consumer confidence fell sharply during demonetization. The much anticipated pickup in discretionary consumer spending has not been observed despite remonetization.
· Credit growth witnessed a historic low of 5.1 percent during the second half of 2016-17. In particular, bank loans to rural areas were badly affected as the growth in rural loans plummeted to 2.5 percent.
· As part of remonetization of currency notes, the RBI had to incur massive expenditure on the printing of new currency notes. The costs of printing new notes were Rs 79,650 million, about 133% higher than the previous year. It also contributed to the decline in the RBI’s surplus payable to the central government from Rs 658,760 million in 2015-16 to Rs 306,590 million in 2016-17.
· The poor execution of demonetization move resulted in long queues outside bank branches as people waited for hours to deposit and exchange the demonetized notes.
To conclude, the government needs to explain why it pursued a shock and awe strategy through demonetization when it already has a wide variety of policy instruments to achieve same objectives?
http://www.countercurrents.org/2017/09/13/has-demonetization-achieved-its-stated-objectives/
