Demonetisation resulted in the significant disruption of the economy and threatened economic output as it hit trade and the level of consumption very hard, a parliamentary panel said on Monday.
The multi-party committee on subordinate legislation minced no words in saying it was anguished that such a major exercise had been carried out without any adequate survey or research on the needs of different sectors.
It also did not want the government to paint critics as anti-national or pro-corruption while insisting on the need to fight corruption, but not harass the “honest, hardworking and tax-paying citizens” who were “made to suffer”.
The committee was unhappy with the ministry of finance for not tabling the notifications issued by the Reserve Bank of India on demonetisation, saying the RBI Act does not have such a provision.
Acknowledging that the note ban, announced on November 8, was an effort to combat corruption, tax evasion, fake currency and black money, the panel said, “Inevitably, it is the low income and rural households that have been hit hard by the currency reform.”
“Though the ministry (of finance) took steps to mitigate the effects, it cannot be ignored that it created a significant disruption throughout the economy and threatened economic output,” the 15-member committee headed by Congress MP T Subbarami Reddy said.
While appreciating the efforts to move towards a cashless economy, the committee cautioned the government that India’s economy relies predominantly on cash, and said the effects of demonetisation were greater than anticipated. The restrictions on the withdrawal of cash were made uniform for all customers without considering the needs of different sections of society and businesses, it said.
The panel also reminded the government that only less than half of the population uses the banking system for monetary transactions. During its meetings with officials and stakeholders, the committee also raised serious questions about the preparedness in handling such an exercise.