New Delhi: Demonetisation achieved several goals, including deterring terror funding, boosting digitalisation and facilitating the transition of the non-formal economy into a formal economy, Finance Minister Nirmala Sitharaman informed the Rajya Sabha on Thursday.
"Since illegally held cash forms the major chunk of terrorist funding, after the demonetisation, most of the cash held with the terrorists turned worthless. Demonetisation led to the instant extinguishment of high quality fake Indian currency notes," she said in a written reply to Samajwadi Party member Vishambhar Prasad Nishad.
The central government had demonetised the high-value denomination notes with objectives to eliminate black money, curb infusion and circulation of fake notes, create deterrence to the funding of terror and left-wing extremism, facilitate the transition of the non-formal economy into a formal economy and boost digitalisation. "Growth of Digital Transactions in terms of value has increased to 188.07 lakh crore in September 2018 from 112.27 lakh crore in Nov 2016. Digital Transactions in terms of volume has increased to 241.88 crore in September 2018 from 91.83 crore," the reply said.
The average growth rate of notes in circulation has also decreased, it said. "Notes in circulation on 31st May 2019 are only 21713.85 billion, the demonetisation, followed by digitalisation and reduction of cash use in the informal economy has succeeded in reducing the notes in circulation by as much as 3408.68 billion rupees," it said.
"As reported by RBI, 762,072 pieces of counterfeit banknotes were detected in the Banking system during 2016-17, 522,783 pcs. in 2017-18 and 317,389 pcs. in 2018-19. Hence, demonetisation resulted in curbing of the counterfeit currency," it added.
There were also some short-term costs of demonetization in form of inconvenience and hardship, especially to those in the informal and cash-intensive sectors of the economy, however "it was taken care of very soon".
"Demonetisation also resulted in better tax compliance, greater tax revenues, more formalization of the economy and higher digital transactions." "The economy has achieved high growth that averaged 7.5 per cent in the last 5 years (2014-15 to 2018-19) amidst significant improvements in macro-economic stability. As per the provisional estimate of national income, the growth of real Gross Domestic Product (GDP) for 2018-19 is estimated at 6.8 per cent. "The growth rates of GDP at constant prices for the years 2015-16, 2016-17 and 2017-18 were 8.0 per cent, 8.2 per cent and 7.2 per cent respectively," it added.