‘Economy Needs To Be Cashless’

Union minister of state for finance and corporate affairs, Arjun Ram Meghwal, rubbishes claims that the GDP would be hit by the demonetisation. He discusses the aftereffects of the government’s decision in an exclusive interview with BW Businessworld’s Suman K. Jha.

Excerpts:

What is the reaction at the ground level to the demonetisation of currency notes?
There’s a groundswell of support for the Prime Minister’s move on demonetisation. We have been visiting far flung areas and this is the reaction that almost all of us have got. After the Opposition created a ruckus in the Lok Sabha and Rajya Sabha, the Bharatiya Janata Party asked its members to meet people at the ground level. I met people in the national capital as well as in my constituency in Bikaner. The common refrain is that – ‘we might be inconvenienced, but we all support the PM’s move’. The people are saying that they yearned for a Prime Minister who would take tough, but well-meaning decisions like this.

Congress vice president, Rahul Gandhi, joined an ATM queue in the capital. To his surprise, the people started chanting ‘Modi Modi’. The Opposition parties are rattled by the growing support and soaring graph of our Prime Minister and our government.

Many, including some economists, say the ill effects of demonetisation outweigh its benefits...
There were four objectives of this announcement. One to put an end to the cycle of terror in Jammu and Kashmir and Naxal infested areas and states. We are already witnessing the effect in these states. Two we said we would put an end to the cycle of generation of black money. You will see the results in the days to come. Three the decision was to check circulation of fake and counterfeit currency. You will see the results in the days ahead.

Four the move was also to check corruption in the system. This is a long-term project, but the move has hit at corrupt practices. It is also expected to check smuggling of drugs and weapons. Many commentators are saying that daily wage workers are not being paid; retail trade is being hit. We are taking stock on a daily basis and taking measures to mitigate people’s sufferings. There may be a few problems in the short run, but in the long run, there are only benefits. This country must move towards a cashless economy.

But aren’t farmers in a fix in the sowing session?
We have already made arrangements for them to withdraw Rs 25,000. Similarly, traders can withdraw Rs 50,000. Those who have weddings in the family, can withdraw Rs 2.5 lakh. We have been revising our guidelines as per the changing needs and evolving scenario.

Do the Supreme Court’s observations on demonetisation worry you?
But the Supreme Court has not given any stay on the decision. Any running commentary is not part of any verdict. We also get to learn from the apex court’s observations.

Were adequate arrangements not made before the decision was announced?
We had to keep utmost secrecy. Do they mean to say that the recalibration of the ATMs should have been done in advance? Would black marketers and hoarders then not have known of the decision? Some people, and Opposition parties, are just talking in thin air.

Some economists say the GDP may take a hit in the short run.
According to the World Bank, the shadow economy is 23 per cent of the national GDP. The unaccounted part of the GDP will get added to it – the GDP will rise, not fall. No matter what the naysayers may say, the decision has been hailed even in Pakistan. People in China have welcomed this. Transactions will now happen through the banking system and cheques – and consumers will get their legitimate rights.

High-denomination notes were banned to discourage hoarding and the black economy. So, why was the Rs 2,000 note introduced?
Terror agencies got to know about the features of the Rs 500 and Rs 1,000 currency notes. So we discontinued them. The RBI had proposed bigger notes – of denominations of Rs 5,000 and Rs 10,000. The features of the Rs 2,000 currency note are foolproof. Terror agencies cannot easily copy its features.

Can we expect more such measures?
This government has been making efforts to check the black economy. The SIT was constituted as the first step. Benami Transaction Act, IDS Scheme, etc. were taken. The PM has repeatedly mentioned how serious the government was about tackling the black economy. In future too, the Narendra Modi government is committed to rooting out the black economy from the system.

suman@businessworld.in, @skjsumankjha