The Centre told the Supreme Court on Thursday that the demonetisation decision is a step to convert India’s black economy into white and ensure that the cash percentage of country’s GDP, which currently stands at a high of 11.5 per cent, is brought to an average of four to five per cent as prevailing in the developed countries.
Giving its response to a bunch of PIls challenging the demonetisation decision to be anti-people, the Ministry of Finance informed the apex court that the move was aimed at ensuring that the unaccounted or idle cash forming the shadow economy of the country is re-circulated into the banking system, in order to make more resources available to the financial institutions. This in turn would lead to better cash flow and lowering of interest rates on loans, the affidavit said.
However, to the apex court’s query whether the Government was making plans to reduce the inconvenience faced by public, the Government reiterated the time-to-time decisions taken by it to increase withdrawal limits, allowing use of old currency notes for emergency services, and making concessions for farmers, small time traders and those in the middle of wedding preparations.
Pointing to the rationale behind banning use of old Rs 500 and Rs 1000 bills, the Centre said, “As per Economic Survey for 2014-15 and 2015-16, the economy has grown by only about 30 per cent during 2011 to 2016…There has been sharp and disproportionate growth of circulation of high denomination bank notes to the tune of 76.38 per cent in Rs 500 denomination and 108.98 per cent in Rs 1000 denomination. This indicates two major threats, viz, infusion of fake Indian currency notes and generation of black money.”
The Government further said that it believes that cash is excessively traded in the real estate thus pushing up real estate prices and reducing availability of affordable housing to the poor and middle class. With the demonetisation policy, the affidavit said, “greater over the board transactions will lead to a decline in real estate prices making affordable housing available to all.”