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Transparency on Demonetisation Would Have Been Greatest Instrument of Fraud, Says Finance Minister Arun Jaitley

The finance minister was responding to a question that why Prime Minister Narendra Modi kept the demonetisation plan a closely guarded secret with only a handful of top officials privy to the move.

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Updated:October 11, 2017, 12:23 PM IST
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Transparency on Demonetisation Would Have Been Greatest Instrument of Fraud, Says Finance Minister Arun Jaitley
File photo of Union Finance Minister Arun Jaitley.
Washington: Demonetisation couldn’t have been announced beforehand as it would have been the “greatest instrument of fraud”, said Union Finance Minister Arun Jaitley, in defence of the sudden announcement that shook the nation on November 8 last year.

He further said that announcing the major move in advance could have resulted in people buying gold, diamond and land and going through various kinds of transactions with the cash they had, said Jaitley, who is on a week-long visit to the US to attend the annual meetings of the International Monetary Fund and World Bank.

"Transparency is a very nice word. But transparency in this case (of demonetisation) would have been the greatest instrument of fraud,” Jaitley told students of the Columbia University in New York on Tuesday.

The finance minister was responding to a question that why Prime Minister Narendra Modi kept the demonetisation plan a closely guarded secret with only a handful of top officials privy to the move.

"Secrecy was the essence of that decision making (process). I think, one of the greatest success of demonetisation was that the prime minister and the team -- obviously the RBI was involved, the finance minister was involved kept it a closely guarded secret," he said.

"Otherwise in a process where a decision is taken, alternate currency is printed, thousands of people involved in the printing do not know why they are doing it, the currency is collected, tabulated and sent to the currency chest and one has to be ready with the alternate currency the moment it is demonetised and still we were able to keep it a closely guarded secret," he said.

Emphasising that the implementation of demonetisation was a "success", Jaitley said.

"There were no single public unrest in its immediate aftermath."

"This was the largest ever currency replacement exercise. There was inconvenience. Television reporters went and provoked people outside the banks, but still people said that though they were feeling the pinch of it, it was a good move and they support it," the minister said.

Demonetisation had a lot of popular support, Jaitley said, adding that as a result of its implementation the government has been able to manage a large part of the cash currency.

"Digital transactions have doubled. A large number of people have joined the tax net," he said.

On Goods and Services Tax, he said that it has been the "smoothest possible transfer" from one taxation system to the other.

He said that the GST which has been by and large running smoothly would throw up situations which are not anticipated.

"These are challenges which a new system throws up," he said, noting that after the GST came into force they realized that there was no provisions for exemption, and only for refunds.

"The exporters refund was taking a lot of time and their capital was being blocked. It was a legitimate demand and this was immediately rectified," he added.

"Narrow base was the second challenge thrown up. After the first two months of deposits we realised that 95 per cent of the GST has been paid by only 400,000 accesses. So, it is only the organised sector which is paying the substantial part," he said.

"The bottom base has to expand but the tax component coming from them is relatively less," he said, adding that there was an effort to reduce the compliance burden on smaller ones and trying alternate means to get them in the tax net.

"It is the lesson we learnt in the first two months,” he said. GST he said is a common taxation system, which will allow a free flow of goods and commodities across the country.

"Building a political consensus on it was difficult," he acknowledged.

"At the end of the day, I will give full credit to also the states in India, which realised that they will be the eventual beneficiaries, he said.

"And therefore even when their parent political parties were talking a different language, the state governments all acted in tandem. One after the other each one of them started supporting. The result was very obvious, we could pass the constitutional amendment, we could pass the multiple legislations," he said.

With PTI inputs
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