Demonetisation will benefit everyone in the long run: FM Jaitley

The sucking out of all currency notes of denomination Rs 500 and 1000 that formed 86% of all cash transactions could impact short-term consumption but will eventually benefit the country, finance minister Arun Jaitley said on Thursday.

Underlining that individuals with large deposits will come under the scrutiny of the tax department, Jaitley pointed out that a large part of this cash was lying “static.”

“There will be some constraint on small purchases for a few days, till there is adequacy of currency, but this would be beneficial in long run,” the finance minister said at the inaugural session of the Economic Editors’ Conference.

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Jaitley assured that the small depositors will not be subject to any harassment and kept outside any scrutiny.

“It is only those with large amounts of undisclosed money who will have to face the consequences under existing laws,” he said.

Jaitley said that temples and trusts, which receive hoards of cash, will also be subject to scrutiny.

Replying to a question, the minister said that the impact of demonetization will also impact the real estate sector and gold consumption. Circulation of cash has been rampant in transactions in real estate and gold purchases.

Chief economic adviser Arvind Subramanian said that the exercise to demonetise the high value currency notes will not amount to any reduction in wealth.

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“Some unaccounted wealth will be impacted…instead of seeing it as a reduction of wealth, it must be seen as transfer of unaccounted wealth...a transfer of this unaccounted wealth from the private sector to the government and public sectors, which then will boost the economy,” Subramanian said.

Soon, the Reserve Bank of India (RBI) will reintroduce currency notes of Rs 1,000 in a new design and different features. Besides, the currency notes of Rs 50 and 100 to would be introduced in new designs.

However, Shaktikanta Das, secretary, department of economic affairs said that the existing currency notes of these denominations will not be demonetized.

Meanwhile Jaitley, touching upon the issue of implementation of the goods and services tax (GST), said discussion and consensus would be the preferred option. The GST Council is slated to meet on November 24 and 25 to resolve the “pending issues,” one of which is related to dual control.