Soon after former Finance Minister P. Chidambaram taunted the demonetisation scheme asking if it was created to convert black money into white, Union Finance Minister Arun Jaitley said that the former finance minister had "no understanding of the objective of demonetisation".
The RBI in its Annual Report for 2016-17 said that 99 percent of the junked Rs 500 and Rs 1,000 notes has returned to the banking system.
Former finance minister P Chidambaram reacted by hitting out at the government and saying "99% notes legally exchanged!"
The minister said the note ban had a positive impact on its objectives - of formalisation of the economy, an attack on black money and a cashless economy.
"Objective of demonetisation was that India is predominantly high cash economy therefore that scenario requires to be significantly altered", he said.
Jaitley's comments on Wednesday evening, shortly after the Reserve Bank of India (RBI) announced that 98.96% of culled notes had been returned, sparking opposition criticism on the efficacy of the move that had sucked out 86 per cent of the currency in circulation and led to a massive cash currency for several months.
"There has been significant expansion of direct and indirect tax base".
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Reacting to the charge demonetisation had failed as nearly 99% of scrapped Rs 1,000 and Rs 500 notes were deposited, Jaitley said the measure was being confused with confiscation of currency.
It needed to be seen in the context of a wider tax base, a more digitalised economy, lesser use of cash and an integration of the informal economy with the formal, he said. "People who haven't taken a single step against black money haven't understood aim of note ban".
Speaking on the way forward, Jaitley stated that the next step would be to put an end to black money used in elections, adding that the final stage of proposals is being deliberated. "That is 1 per cent. Shame on RBI which "recommended" demonetisation", he tweeted.
"RBI "gained" Rs 16,000 crore, but "lost" Rs 21,000 crore in printing new notes!"
According to Jaitley, another major achievement through demonetisation was to fix the ratio of cash in circulation.
In a statement, the Finance ministry said that demonetisation had been "immensely beneficial to the Indian economy and people" and argued that expectations of some people about "a very large shock to economic growth on account of demonetisation have been belied". The fact that bulk of SBNs has come back to the banking system shows that the banking system and the RBI were able to effectively respond to the challenge of collecting such a large number of SBNs in a limited time. "Since November and until May 2017, Rs 17,526 crore has been found as undisclosed income and Rs 1,003 crore has been seized", finance ministry said.
The Income-Tax Directorates of Investigation have identified more than 400 benami transactions up to May 23, 2017 and the market value of properties under attachment is more than Rs 600 crore, the statement added.
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