Note ban attacked black money, raised tax base: PM in I-Day speech

Said GST led to a 30% cut in travel time by trucks but didn't mention contraction in July IIP

Prime Minister Narendra Modi, from the ramparts of the Red Fort, rolled out statistics to defend demonetisation, while skipping mention of a lower dividend by the Reserve Bank of India (RBI) as a pitfall of this move. 

In his Independence Day speech, Modi implicitly took on critics for blaming his government for not generating jobs, saying the MUDRA scheme is making youth a provider of jobs. 

He said the goods and services tax (GST) has led to a 30% cut in travel time by trucks, but did not refer to the transitory problems that have led to a contraction of the Index of Industrial Production (IIP) and Purchasing Managers’ Index (PMI). 

He recalled that the first task of his dispensation was to constitute a special investigative team to underscore his government’s stance on corruption. 

“I want to tell the countrymen proudly that we have confiscated black money worth Rs 1.25 lakh crore. The culprits would be brought to book and forced to surrender,” he said. 

He said demonetisation, which followed the government’s earlier anti-black money stance, has achieved several milestones.

“The hidden black money has been brought into the formal economy. According to the research conducted by outside experts, about Rs 3 lakh crore that had never come into the banking system before, has been brought into the system after demonetisation,” he said. 

More than Rs 1.75 lakh crore deposited in banks is under scanner. Black money worth Rs 2 lakh crore had to be deposited in banks and this system has forced them to be accountable, he added. 

The number of new taxpayers filing income-tax (I-T) returns from April 1 to August 5 - the extendable deadline for filing tax returns - is 5.6 million, while in the same period last year, only 2.2 million filed returns.

“In a way, it has more than doubled. This is the result of our fight against black money,” he said. 

However, he did not mention how demonetisation has also led to the Reserve Bank of India (RBI) giving a lower dividend of Rs 30,659 as surplus to the government in 2017-18, which is half of last year’s Rs 65,876 crore. The cost of printing new notes and absorption of surplus money led to this, experts said. 

He also skipped mentioning that the RBI is yet to count the currency notes that have come back into the system. 

Without naming Operation Clean Money, Modi said over 1.8 million people have been identified, whose income is much higher than their declared income. 

“Around 450,000 people have now come forward and are trying to tread the right path after accepting their mistakes. As many as 100,000 people, who had neither heard of I-T nor paid I-T, have now been forced to do so,” he said. 

Reiterating that after demonetisation, data mining astonishingly revealed that there are 300,000 shell companies dealing in hawala transactions, he said registration of 175,000 of these have been cancelled.  

“You will be surprised to know that there are some shell companies operating from a single address. As many as 400 companies have been found to be operating from one address.  There was no one to question them. There was total collusion,” he said.

However, he avoided mentioning market regulator Securities and Exchange Board of India’s move to ban trading on 331 shell companies. The Securities Appellate Tribunal had allowed resumption of trading on eight of them.