Demonetisation for digitisation? Jaitley hails push to cashless economy

FM said the government was aware of the cash crunch but had envisaged long-term advantages

On Saturday, Union Finance Minister Arun Jaitley said the government was aware that demonetisation would cause a cash crunch in India but had envisaged long-term advantages like "great and substantial" movement towards digitisation of the economy.

"We were conscious of the fact that demonetisation, to an extent would cause a cash crunch temporarily for a quarter or two which would impact us adversely. But there were some long-term advantages which were envisaged," Jaitley told Bloomberg TV in an interview.

"The use of cash relatively comes down, the use of other modes of payments increases. The second is, there is a substantial number of assesses who have been added," Jaitley said.

He also said that he anticipates a substantial increase in the tax base.

"I think the new normal has been established in India and a message is loud and clear that it's no longer safe to deal substantially in cash," said the finance minister.

Responding to a question, Jaitley said he does believe that India has carried on a large number of structural reforms in the last few years.

"With the kind of structural reforms which are setting in, the kind of public expenditure and foreign direct investment we are getting in, I do expect the growth to turn around and improve this year," he said.

"I do believe that the net effect of demonetisation is the invigoration of the informal economy with the formal one. The GST is likely to set by the first of July this year," he said, hoping that with a good monsoon being forecasted this year, the growth would increase.

"The one important challenge that we have is with regard to a private sector investment, we do believe that the global curve is also turning slowly. Domestic consumption is improving. And hopefully, if we are able to address the problem of the Indian banking system itself over the next one year or so. We will again pick up significant growth," Jaitley said.