Accordingto Finance Minister Mr. Arun Jaitley, the success of demonetization should be seenthrough the lesser circulation of high value currency, increase in tax base anddigital transactions. He has three important lines to analyze the success ofdemonetization.
(i) The annual report of RBI on the circulation of currenciesbefore demonetization, which is estimated to be 17.77 lakh crore and now thecurrencies in circulation are around 14.75 lakh crore as on august 4, 2017,(ii) The expansion of the number of assesses and tax base of both indirect anddirect taxes, and (iii) the increase in digital transactions. He further pointsout that the number of people using digital transactions has actually increasedduring the period between November and January. (Sep. 18, 2017). Thepublic debate on demonetization has raised three questions. First, its broader aspect ofmanagement.
Second, its economic impact in short (inconvenienceand the hardship) and long run.Third, its implications for thebroader vision underlying the future conduct of economic policy. Demonetizationhas its own potential to bring benefits, so to say, reducing corruption,greater digitalization and financial savings. This will result in higher GDPgrowth and better tax compliance. The introduction of GST will also boost the Indianeconomy. Greater the surveillance on tax payers, the more will be the collectionof income through taxation, which in turn can be very well used for infrastructuredevelopment and economic growth. Due tothe impact of demonetization there is an increase in the banks deposit andnumber of new tax payers.
It is hoped that demonetization would pave the wayfor financial inclusion and brining black money into the formal economicsystems. Whenwe evaluate the impact of demonetization for Indian economy, it has got both positiveas well as negative aspects. On the positive side, demonetization has helpedthe Indian society to adapt to new methods of payment such as, e-wallet, creditand debit cards and paytm etc. On the negative side, demonetization in thefirst face has very badly affected the informal sectors and the ruralpopulation which are not at all familiar with the new world order and itsstyles.