On the eve of 8th November 2016, Prime Minister Narendra Modi announced the ceasing of Rs 500 and Rs 1000 for any legal tenders from midnight of 8th November 2016 and the term called as “Demonetization”
The main motive behind this colossal step was to keep a check on terror funding by Pakistan, corruption, black money and printing of counterfeit currency.
However, the opposition parties criticized the government for this “notebandi”, stating that the demonetization fulfilled none of the motives.
The former Prime Minister and a renowned economist, Dr Manmohan Singh, called the demonetization “monumental mismanagement failure.” Delhi Chief Minister Arvind Kejriwal, West Bengal CM Mamata Banerjee, Congress Leader Rahul Gandhi and many other ministers also criticized this initiative and vehemently attacked the Modi Government.
Asking the BJP-led NDA government at the Centre to roll back demonetization, Kejriwal and Mamata threatened a “revolt”.
Despite all this criticism, the Modi government didn’t change its mind and stood its ground. Instead of rolling back demonetization, it started to promote a cashless economy through various digital platforms to become more transparent and check black money and corruption.
Although there are numerous criticisms against this demonetization drive, some advantages came in handy several times.
During Lockdown, the cashless economy, which the government promoted at the time of demonetization, became a blessing in disguise for the survival of people during the lockdown period.
People ordered essential items and made advanced payments through various platforms through credit cards, debit cards, online banking, and UPI. If these online payment methods don’t exist, people would have to go out of their homes, leading to a much higher number of covid cases.
As the government started the unlocking phase from June 2020, it happened in 6 significant stages till November 2020, and in every step, some activities were restored but in a new form.
At this point, almost the whole country had encountered a cashless economy, and this digital mode of payment had provided a considerable advantage during the second wave. If this cashless economy didn’t, the whole situation would have been much worse, and people would have come more in contact, which would lead to widespread coronavirus.
Now the question arises how much the demonetization had affection taxation in India. The answer to this question is demonetization is not the only policy change that has affected taxation policy in India.
And this was followed by several other policies like Goods and Services Tax in July 2017 and when the government announced a significant reduction in Corporation Tax rates, which led to a sharp fall indirect tax collections.
In the broader picture, if we see the gain from this demonetization, the value of transactions through the Unified Payments Interface (UPI) grossed almost $100 billion in October 2021.
UPIs were only introduced in the post-demonetization period, and their rapid growth is truly stellar. It is an innovation of global scale and quality. But at some level, neither the Narendra Modi government nor the BJP celebrates the demonetization.
Of late, it has proved to be a significant boon not just for the dispensation but also for the commoner.
