New Delhi: Indian Finance Minister Arun Jaitley said yesterday that a cash crunch following the scrapping of high-value banknotes would ease by December 30 with the release of new 500 and 2,000 rupee notes.
Jaitley said, however, that the amount of new banknotes being released would not be the same as that circulating before November 8, when Prime Minister Narendra Modi announced the so-called demonetisation to purge the economy of illicit “black money”.
Modi, at a stroke, removed from circulation banknotes worth an estimated 17 trillion rupees ($249 billion). Finance ministry sources say they plan to reissue just more than half of this – a task that would take months given the capacity of India’s four banknote printing presses.
“Obviously, one of the advantages of this exercise is going to be that you won’t have the same level of paper currency which existed,” Jaitley told the Hindustan Times Leadership Summit.
Officials expect some illicit cash never to be returned and to expire worthless, while other money that is deposited will remain in the banking system. The government’s goal is to encourage the use of cashless forms of payment, a challenge for most Indians who live and work in the informal economy.
“It does create a disruption,” said Jaitley. “But I don’t see the disruption lasting for very long. You may see some impact for a quarter or so.”
Jaitley also repudiated a call by the left-wing government of India’s state of West Bengal to delay a planned Goods and Services Tax (GST) to avoid inflicting another economic shock in the wake of demonetisation.
He said the plan was still to launch the new tax on April 1. Time was tight because, under a constitutional amendment that enabled the GST, India’s old system of indirect taxation would lapse next September.
“If on September 16, 2017, there’s no GST, then there’s no taxation,” he said. “Our intention is to make sure it gets implemented from April 1, 2017.”
Meanwhile, the government said old notes would no longer be accepted at petrol stations after yesterday, fuelling anger across the country.
“This cannot be right. First you say we have until December 15 and suddenly now you are saying something else,” said R S Yadav, a government employee, as he waited for his turn on a rickety two-wheeler at a refuelling station in New Delhi.