Note ban curbed many ills: Survey

'Long-term benefits will follow short-term pain'

Stressing that demonetisation was aimed at signalling a regime change, the Economic Survey 2016-17 on Tuesday said the note ban was instrumental in curbing many ills, including real estate prices. Demonetisation can have profound impact on the real estate sector. In the past, much of the black money accumulated was ultimately used to evade taxes on property sales, the Survey said.

While the Survey did not rule out short-term pain due to demonetisation, it said long-term benefits were immense. “These may not necessarily  manifest in the next six months but evidence should start trickling in over a one-year horizon and beyond. And it is not difficult to identify the future markers of success,” the Survey said.

It brought out changes in the use of digital payment methods across the three categories of digital access identified earlier, namely smart phone users, regular phone users and the phoneless. The second advantage of demonetisation would be a decline in the cash to GDP ratio as more saving is channelled through the formal financial system and black money eradicated. On one estimate of black money, the cash-GDP ratio could decline permanently by about 2 percentage points, it said.

Increase in taxpayers
“Perhaps the most important marker of success will be taxes. The number of new income taxpayers as well as the magnitude of reported and taxable income should go up over time,” the Survey said. The Survey, however, cautioned that the transition to digitisation must be gradual and take full account of the digitally deprived.

The Survey also emphasised that success of digitisation would depend considerably on inter-operability of the payments system, and advised banks to facilitate and “not thwart” inter-operability.