Successful Communication by GoI To Tax Offenders Through Demonetization Drive

Government of India on 8th Nov 2016 announced discontinuation of 500 & 1000 currency bill. The vision and mission was to eradicate Black Money, Corruption, Terror Funding and many more. By opting for Demonetization Drive, government took risk of complete business paralysis for next 3 to 4 months. The recent PMI and service index shows contraction and it is going to impact FY17 GDP dearly.

The discontinued currency bills constitute 86% of the total floating currency bill and estimated that around  15.5 lakh crore is in the circulation. As per the report 13 lakh crore is already deposited in the bank and it's expected that another lakh crore will be deposited till the set deadline by the government.

At the start of Demonetization Drive, GoI expected that around 3 to 4 lakh crore will go out of circulation but it seems impossible now.

It raises following queries:

1. Did government over estimated Black Money Circulation Amount?
2. Did Black Money hoarders used the acceptance of old currencies in Hospitals, petrol pumps, Medicine shop as tool to get their money converted?
3. Was it worthwhile to take the economic hit by opting for Demonetization Drive?

Whatever is the outcome but biggest brownie point of the Drive is the clear message to common people that government is serious about Black Money, Corruption and illegal business practices and will not hesitate to act against offenders. Both the direct and indirect tax offenders are scared that they are monitored by one or another way  which will force many new addition of direct and indirect tax payers.

The clear message by the government that they are aware about the misuse of millions of Jan Dhan Yojana account out of total 258.5 million account holders and action will be initiated is a major win of the Drive. It is widely expected that GoI will initiate against Gold Hoarders and benami property as step 2 and 3 , henceforth common citizens should not think that that GoI is losing Demonetization Drive as government enforcement agencies are investing sudden surge in Deposits.

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About Devendra Prasad

20 years plus industry veteran of domestic and international ICT domain with the expertise in Business, Technology, Strategy and Analysis. Specializes in forecasting impact analysis, trends and recommendations for Investments, Technology and Regulations.