Demonetisation: Short-Term Inconvenience Will Be More For Farmers, Small Businessmen, Says Jayant Sinha
Jayant Sinha said that while farmers and small traders will be inconvenienced by the demonetisation scheme, the urban middle class will be unaffected.
This adjustment will be easy, said Sinha, because the NDA government had already put the basic infrastructure for a digital economy in place.
Sinha termed the decision on demonetisation as a “historic and transformational” step.
The Prime Minister’s decision to demonetise Rs 500 and Rs 1,000 notes will immediately inconvenience farmers and small traders the most, according to Jayant Sinha, Minister of State for Civil Aviation. The urban middle class, which has already largely moved to the digital payments economy, will not be affected to the same extent.
“There is definitely a short term inconvenience as people adjust to this new way of transacting,” Sinha, who was earlier Minister of State for Finance, said in an exclusive interview to Swarajya. He termed the decision on demonetisation as a “historic and transformational” step.
Sinha explained that a majority of transactions in the agrarian economy are done in cash, as most people have not transitioned to using banks or digital payment methods. The harvest season is currently underway, and farmers are taking their produce to sell in the mandis, where every transaction is done in cash. He also pointed out that since income tax is not levied on agricultural income, people have never had an incentive to have PAN cards or use bank accounts. “For them, this will be a major switch.”
The other section that will be affected, according to him, will be the small traders, whose entire working capital is in the form of cash, and others like them. “If you are a small trader, you are getting everything in cash, you are paying for everything in cash.” But he is confident that people will adjust to new ways of transacting.
So yes, there will be a bit of adjustment as people move from cash to digital economy but that is a good thing. In a sense having this very clear break now will motivate people to move to digital, which is extraordinarily important for India.
This adjustment will be easy, he says, because the National Democratic Alliance government had already put the basic infrastructure for a digital economy in place, before the shock announcement. The government, he says, had been working on this for a long time. He listed out Jan Dhan, the unified payments interface (UPI), unique identity Aadhaar and mobile wallets.
And though the print and television media has been full of reports of the middle class being affected by the move, Sinha feels the impact on people living in urban areas – most middle-class people “like you and me” – will not be significant. “This is really not at all a major inconvenience because everything we are paying for is by plastic, debit or credit cards. So for us it doesn’t make much of a difference.”
Emphasising that this demonetisation is another step in the persistent efforts the government is making to combat corruption, Sinha quoted the Prime Minister saying that corruption is a “deemak” (termite) that is eating up India and that it has been extremely important for this government to shut down all negative consequences that flow from corruption and black money. He also made it clear that demonetisation is only the latest in a series of steps the government has taken to curb black money.
Among the first things the government did, he points out, was to set up an SIT (special investigation team) to combat black money and corruption. Many recommendations of this SIT, which are confidential, have been implemented. “We have been implementing a number of steps, starting with disclosure schemes on foreign and domestic black money, cutting back on cash for purchase for real estate, for just buying normal luxury items. There has been a concerted attempt to take the black economy and to compress it and compress it and compress it. When you compress black economy, it has many benefits", the minister said.
First, it stops corruption. Second, it cuts back on terrorism financing, whether through counterfeit currency or through hawala channels. So this step assumes significance from the national security point of view. Third, it increases tax revenues and makes the nation more prosperous.
Since a lot of people who have been evading taxes by operating in the parallel cash economy are being brought into the digital economy and legitimate financial channels through this route, it makes things more transparent.
The minister also hinted that demonetisation is one of the many recommendations of the SIT which have been implemented by the government. He said that though the government had various alternative scenarios, the final decision on sensitive matters like taxation and demonetisation rests with the Prime Minister and the Finance Minister. “This is a historic and transformational step.”
The government had earlier said its black money disclosure scheme generated over Rs 65,000 crore of black money and undisclosed assets. This story quotes an Assocham study to say that Rs 500 denomination notes account for at least 46 per cent of the banknotes in circulation, and Rs 1,000 notes account for around 40 per cent of the total notes in circulation.
Finance Minister Arun Jaitley has already cautioned against any immunity from taxes to people depositing Rs 1,000 and Rs 500 notes in banks from tomorrow.
Jaitley further said that housewives and farmers with genuine savings need not worry about depositing cash in their bank accounts. “The small amounts that people will deposit like Rs. 25,000, 30,000 or 50,000 lying in house for expenses, whatever money could be there for meeting normal family expenses they need not worry. They can go to banks,” he said.