Announcing the demonetisation initiative in advance could have resulted in people buying gold, diamond and land and going through various kinds of transactions with the cash they had, says finance minister.
Photograph: Courtesy, finance ministry on Twitter.
Finance Minister Arun Jaitley has defended the government's decision to maintain secrecy over demonetisation, saying transparency in this case would have been the "greatest instrument of fraud".
Jaitley, who is on a week-long visit to the US to attend the annual meetings of the International Monetary Fund and the World Bank, also said that the series of reforms like demonetisation and the Goods and Services Tax (GST) has put the Indian economy on a "far more stronger track".
"These are institutional reforms. These are structural changes. And these structural changes, I think. have put the Indian economy on a far more sound track so that we can look forward for a much cleaner, much bigger India economy in the days and years to come," Jaitley said, addressing the students of the prestigious Columbia University in New York.
He said that announcing the demonetisation initiative in advance could have resulted in people buying gold, diamond and land and going through various kinds of transactions with the cash they had.
"Transparency is a very nice word. But transparency in this case (of demonetisation) would have been the greatest instrument of fraud," Jaitley said.
The finance minister was responding to a question on why Prime Minister Narendra Modi kept the demonetisation plan a closely guarded secret with only a handful of top officials privy to the move.
"Secrecy was the essence of that decision making (process). I think, one of the greatest successes of demonetisation was that the prime minister and the team -- obviously the RBI was involved, the finance minister was involved – kept it a closely guarded secret," he said.
"Otherwise in a process where a decision is taken, alternate currency is printed, thousands of people involved in the printing do not know why they are doing it, the currency is collected, tabulated and sent to the currency chest and one has to be ready with the alternate currency the moment it is demonetised and still we were able to keep it a closely guarded secret," he said.
Emphasising that the implementation of demonetisation was a "success", Jaitley said, "There were no single public unrest in its immediate aftermath".
"This was the largest ever currency replacement exercise. There was inconvenience. Television reporters went and provoked people outside the banks, but still people said that though they were feeling the pinch of it, it was a good move and they support it," the minister said.
Demonetisation had a lot of popular support, Jaitley said, adding that as a result of its implementation the government managed a large part of the cash currency.
"Digital transactions have doubled. A large number of people have joined the tax net," he said.
Jaitley said consistent steps had been taken to formalise and expand the more formal economy.
"And wanting to formalise that economy, one after the other steps are taken against shadow economy," he said.
"Some of these steps, demonetisation, GST because the GST could lead to de-stocking of existing stocks can have for a quarter or so a transient impact on manufacturing," he said.
Referring to the series of economic reforms that India has undertaken since 1991, Jaitley said the Indian model now seems to be emerging.
Jaitley said there was a consensus on reforms in India. He said the government had convinced the people that domestic investment was grossly inadequate.
"What you require is an additionality of evidence. And therefore, you have to create an environment in India where people find India a friendly place to invest in," he said as he described the key hurdles in the process.
"India has opened up in sectors where there was a scope for opening up. And not in a single case the government faced a protest," he said.
Later, responding to a question, Jaitley said the recent Supreme Court order on the right to privacy lays down the correct exemptions which protects Aadhaar.
"I do believe that the Supreme Court judgement on the privacy matter in accordance with the current timing is a correct judgement. It lays down the correct exceptions which protects Aadhaar," Jaitley told students.
"Article 21 reads that no person can be deprived of his right to life and liberty without procedures established by the law. That procedure has to be fair and just," he said.
Jaitley said that some of the judges also went into what would be the exceptions to the law of privacy.
"The first exception they say is national security. The second exception they say is detection and prevention of crime. And the third exception judges say is distribution of socio-economic benefits," he said.
He said the third exception had been carved out specifically to protect Aadhaar.
"For instance, nobody can see that I spent Rs 1 crore in cash and you can’t ask me the source, because it violates my privacy... So I think, these exception have been well brought out in the judgement itself," he said.
There is a chapter in the Aadhaar law which deals with certain aspects like the manner in which data is to be protected and the consequences of violation, he said.
"So all those safeguard provisions have been brought into the law," he asserted.
