The Indian government had to implement the recent demonetisation as a duty to the nation in order to tackle the menace of black money and bring unaccounted money back into the banking system, Commerce Nirmala Sitharaman said on Thursday.
"This step of demonetisation was absolutely necessary... 87 per cent of our economy was informal and only in cash-driven segments where money would not go to banks. Only about 50 lakh people pay tax, and all others who file returns do not pay any tax," Sitharaman said at a panel decision on 'India's Time to Transform' at the World Economic Forum here.
"Can we survive if this kind of tax to GDP ratio continues... we had to do it, we owed it to the country and we do not regret it. Even if it sounds propagandist, you need a strong and courageous leadership to take such a bold step," she said.
"Right after coming to power, we started with setting up a special investigation team, came out with the scheme for declaration of undisclosed money, tightened tax treaties with different countries to check round tripping of money. We took all these steps," she added.
To a panelist's query about whether the demonetisation exercise could have been planned better, Sitharaman replied in the affirmative, saying, however, that secrecy was of the essence.
"Indians are smart and they would have sensed it and people could have stashed the money away somewhere," she said.
The minister also said that demonetisation has largely been problem-free because ministers and officials were moving around the country to take stock of situation and take necessary measures.
"I am absolutely shocked and I pay my respect to my fellow citizens for going through the hardship and be part of this exercise," she added.
In her intervention at the panel, State Bank of India Chairperson Arundhati Bhattacharya said that for a decade beginning from 2006 the proportion of high value notes (Rs 1,000 and Rs 500) went up considerably to 86 per cent.
"What the problem really is, there were many small and medium businesses that were earning profit but were not paying tax. They feel their margins would not give them ability to carry out business post this and they are worried," she said.
"This is one India where we will need to convince them that they come into the tax net if they are earning enough for paying taxes," she added.
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