Demonetisation helped to curb black money, it was not a stand-alone economic policy; Centre submits affidavit to Supreme Court

NEW DELHI: The central government on Wednesday submitted an affidavit before the Constitution Bench, which is considering the petitions related to demonetisation. The Supreme Court had directed the Reserve Bank and the central government to submit a detailed affidavit on demonetisation. In its affidavit, the Centre justified demonetisation.

The central government reiterated in the affidavit that demonetisation was part of the measures to curb fake currency notes, terror financing, black money and tax evasion. It explained that demonetisation was not a unanimous action of the government and was implemented on the instructions of the RBI to control the parallel economy. The RBI itself had released a report stating that there is no shortage of currency notes available to the public even in the sixth year of demonetisation. In the context of the new report, the central government reiterated its stance that demonetisation was part of increasing digital financial transactions.

Justifying its decision, the government also said, "The expansion of the formal sector and the shrinking of the informal sector were undertaken through a series of policy measures. The policy push included digitalising transactions, technology connectivity and implementation to enable last-mile reach, increasing the tax base, enhancing tax compliance, lowering the cost of doing business, eliminating policy distortions, facilitating financial inclusion at the formal sector level and labour and agrarian reforms."

The withdrawal of the legal tender character was one of the significant steps in the enhanced formalisation of the economy with the aim of expanding opportunities for the millions living on the periphery of the economy, the government said.

The Constitution Bench of the Supreme Court on November 24 will hear the pleas challenging the Centre's decision to demonetize currency notes of Rs 500 and Rs 1,000 in 2016 and said that they want to conclude the hearing on this issue this year.

Various petitions were filed arising from the decision of the Government of India to demonetize the old notes of Rs 500 and Rs 1000.