New Delhi : The Union government on Thursday defended its demonetisation decision as it told the Supreme Court that the move was aimed to unearth the parallel black economy which was adversely affecting the legitimate government revenues and to reduce the ratio of cash transactions.
Telling the court that illegal parallel economy “corrodes and eats into the vitals of the country’s economy”, the government, in its affidavit before the top court, said the black economy constituted 23.2 per cent of the GDP which had an adverse bearing on the poor and middle class.
It said that its decision would create more jobs as banks with large cash – on accounts of large deposits – would be able to extend more loans to enterprises.
It made its defence in its affidavit filed in response to batch of petitions questioning the demonetisation decision and pointing to the difficulties being faced by the people belonging to different strata including poor, middle class people, small businessmen and street vendors.
The court will consider the government response on Friday as the matter is listed for hearing.
Stating that the apex bank and the Finance Ministry were monitoring the distribution of currency notes of all denominations, the government said that the demonetisation was an attempt to unearth the black money that has been stashed in last seven decades.
Black economy, it said in its reply affidavit says, not only fuels inflations but dents the legitimate revenue of the government which in turn affects its welfare and developmental activities.
Pointing to the prices of the house which were being kept high artificially because of the large amount of unaccounted money, the government said that its demonetisation decision would make them affordable.
It has quoted a whaite paper on black economy by the Department of Revenues which says that between 1975-76 to 1983-84, the share of black economy to the GDP rose from 15 to to 21 per cent. It further refers to the World Bank report which says that in 1999 the parallel economy was 20.7 per cent of the GDP and rose to 23.2 per cent in 2007.
Linking demonetisation to digital India, the government has said that it was intended to boost digital payments through credit and debit cards, internet banking, e-wallets and mobile apps.
The government also listed the steps that have taken since November 8 when it had demonetised Rs 500 and Rs 1,000 denomination notes, saying that all steps are being taken to ease the inconvenience being faced by the people.
Telling the court that the difficulties being faced by the people would be sorted out, the government said that all steps are being taken to make the transition smooth and work on recalibrating the ATMs was in full swing.
Pointing to Fake Indian Currency Notes (FICN) to the tune of Rs 400 crore, it said: “It may be noted that FICN that is used for terrorist financing has a highly disproportionate impact on the economy.”
“A few hours of a terrorists attack in Mumbai or in any part leads to loss of human lives apart from catastrophic impact on economy,” it said on the impact of terror funding and terrorist attacks on the economy.