The Modi government “owed” demonetisation to the nation and it had to do it to eradicate black money menace and to bring hoarded cash back into the banking system, Commerce Minister Nirmala Sitharaman said today.
Speaking at a panel decision at WEF on ‘India’s Time to Transform’, she said it may sound ‘propagandist’ but one needs a strong and courageous leadership to take such a bold step.
On why the government felt it was necessary to go for demonetisation, Sitharaman said it was part of the “electoral promise we made to check the black money menace”.
“Right after coming to power, we started with setting up the special investigation team, came out with scheme for declaration of undisclosed money, tightened tax treaties with different countries to check round tripping of money. We took all these steps.
“This step of demonetisation was absolutely necessary....
“87 per cent of our economy was informal and only in cash-driven segments where money would not go to banks ...only about 50 lakh people pay tax and all others who file the returns do not file any tax,” she said.
“Can we survive if this kind of tax to GDP ratio continues .... we had to do it, we owed it to the country and we do not regret it,” said Sitharaman.
The panel also discussed the fight against corruption and black money including through the recent demonetisation move.
In the same panel, Kenneth Rogoff said the same step could have been done in a more systematic manner.
On why it could not have been done with more public planning, Sitharaman said it could have been done but Indians are “smart” and they would have “sensed” it and people could have stashed the money somewhere.
SBI Chief Arundhati Bhattacharya said what was amazing that there were huge crowds outside banks but still there was no riots and the fact that nobody took law and order into their hands is amazing.
“I receive complaints of misbehaviour otherwise every day but this was one period when there was no single complaint. This was a different feeling and I don’t know how it came around,” Bhattacharya said.
She said psychologically people agreed with the move.