Finance minister Arun Jaitley says robust revenue collections, winter crop sowing suggest the demonetisation exercise had benefited the economy
New Delhi: The government is proposing a staggered relaxation of existing restrictions on cash withdrawals from banks after 30 December.
This is aimed at smoothening the transition as the Reserve Bank of India (RBI) supplies new currency notes to replace the Rs500 and Rs1,000 notes withdrawn after demonetization, said a person familiar with the development.
The withdrawal limit for an individual at present is Rs24,000 per week from a bank and Rs2,500 per day from an ATM.
Separately, finance minister Arun Jaitley told select media that robust revenue collections and winter crop sowing suggest that the 50-day demonetization exercise had benefited the economy.
“Of course there would be areas which would be adversely impacted, but what was predicted by the critics has to have rationale with the revenue collection. Assessment can be unreal but revenue is real," said Jaitley.
He said there has been an increase in both indirect and direct tax receipts. For the eight-month period ended November, central indirect tax receipts have risen 26.2% and direct tax receipts 13.6%. If this trend continues, then the revised estimates for tax collection in the current fiscal will exceed estimates in the 2016-17 budget .
His comments received support from RBI governor Urjit Patel.
“It (demonetization) is expected to significantly transform the domestic economy in due course in terms of greater intermediation, efficiency gains, accountability and transparency through increasing adoption of digital modes of payments, notwithstanding the short-term disruptions in certain segments of the economy and public hardship," Patel wrote in the foreword to the Financial Stability Report released on Thursday.
Jaitley said most of the ₹ 5.4 trillion in demonetized currency had been deposited in the banking system and was now accountable. As of 10 December, ₹ 12.4 trillion had been deposited in old currency.
“Cash has an anonymity attached to it. What comes into the banking system gets identified with the person and therefore its impact on taxation and revenue collection is already being seen," he said.
Jaitley said a critical part of the RBI remonetization drive had been completed and that currency pressures had eased significantly.
Ranen Banerjee, partner and leader of public finance at PricewaterhouseCoopers India, said the effect of demonetization would be greater on the informal economy, which is cash-based. “So far, we have data only pertaining to the formal economy, which will feel the impact with a time lag. We need to wait and watch for the fourth-quarter (January-March) GDP numbers to assess the full impact of demonetization," he said.