Leading up to the anniversary of Demonetisation on November 8, there have been many stories doing the rounds of the media. These are more in the nature of a spin on the pros and cons of the demonetisation exercise. It is precisely in these conflicting stories that India’s credibility about any economic figures lies in tatters.
Just about a week ago it was reported that cash in the economy is much lower than what it was in 2016. Then a few days back we are told that the cash is almost at double the level it was in 2016. The latter report is more plausible since in multiple reports over the years since demonetisation it was stated that the cash use in the economy has not fallen. In contrast it has risen signifying that the transition towards a digital economy is slowed down.
It is not that card transactions have reduced. They have also shown growth, what we call organic growth consistent with their trends but nothing dramatic to indicate that it is replacing cash on a massive scale. In India we need to understand that public acceptance of any measure is slow. This is because of our diversity both geographical and economic. Unless an individual is able to rationalise the measure in his mind, he rarely accepts it.
The political leadership if they are in a hurry, like in this measure of converting people to plastic money, they will always fail or come up a cropper. Media also complicates these issues by not reporting the correct news. Media today, a majority of them owned by large industrial groups, is agenda driven and play up to vested interests for their own reasons.
It is rare to see any independent media entity which reports the news as it is. In the above context, there was a media report the other day citing a lady deputy governor of the RBI saying that the buoyant GST collection and increased direct tax growth was related to the better compliance that demonetisation has engineered.
One does not know whether Shaktikanta Das’ tenure is scheduled for completion making this lady to laud the incumbent government to earn brownie points for her candidature to seek the governor’s chair.
The increased GST collection is like a misconception since earlier the majority of the sales tax would have been collected by the States but now everything comes to the Centre. So the Centre’s pile has grown bigger giving the relatively false impression that the indirect sales tax, now called GST, has grown.
As for direct taxes the coverage is still very low compared to developed countries and trends of increased compliance are good and healthy though how Demonetisation can be linked to buoyancy in income tax is not understood.
