Was Demonetization a Step Against Corruption or Toward a Cashless India?
India's demonetization drive was a significant economic reform that aimed to tackle multiple challenges, including curbing black money and strengthening tax compliance. The purpose was not only to eliminate black money but also to set the stage for a cashless economy. As we delve deeper, it becomes clear that demonetization was merely the beginning of a series of initiatives designed to address these issues.
Objective of Demonetization
The primary objective of demonetization was to tackle black money. In a country with a population of over 1.34 billion, fewer than 1 crore people pay their taxes. This stark contrast underscores the need to increase the tax base. Beyond this, demonetization sought to:
Destroy the Parallel Economy: By invalidating old currency notes, the government aimed to wipe out a significant portion of the black money held in these notes. Integrate Unaccounted Money into the Banking System: Encouraging people to deposit their unaccounted cash into the banking system helped in curbing tax evasion and boosted the transparency of financial transactions. Thwart Terror Funding: By reducing the liquidity of black money, the government aimed to make it harder for terrorist groups to fund their operations through illegal means. Promote Digital Transactions: The ultimate goal was to push India towards a cashless economy, which is believed to enhance economic efficiency and transactional transparency.Subsequent Measures and Reforms
Demonetization was the first step in a broader strategy to eliminate black money and promote a cashless economy. Subsequent measures included:
Benami Transactions Act: This act aimed to curb the buying and selling of properties without proper source of income, which is a common method of stashing black money. The Benami Transactions (Prohibition) Act, 1988, was further strengthened to ensure compliance. Garib Kalyan Yojna: This scheme focused on bringing more people into the tax net and easing financial constraints for economically disadvantaged groups, further reducing the reliance on black money.The government has also introduced several other steps, including:
Tax Regulations on Gold Holdings: Setting a limit on the amount of gold one can hold is another move to dissuade the conversion of black money into gold. Promotion of Digital Payments: Encouraging digital transactions through various schemes and initiatives has helped in reducing the reliance on cash for transactions.Future Steps and Digitalization
The current focus now lies on curtailing the flow of black money rather than just its stock. Cash transactions continue to create black money, and moving towards a cashless economy is an effective way to combat this issue. Since demonetization, people have become more wary of using cash for transactions, and tax regulations for gold holdings have further restricted this avenue for stashing black money.
The ultimate objective is to digitize existing immovable properties, linking them to Aadhaar and PAN cards, thereby making it easier to track benami transactions. Similarly, steps are being taken to move towards a cashless economy, which would make it difficult for people to stash their black money in cash or gold.
As the country continues to implement these measures, it is clear that demonetization was a significant step in transforming India's economic landscape.