Lok Sabha Question No. 2845 (UNSTARRED), answered on 2016-12-02
Subject: Impact of Demonetization
Ministry: FINANCE
Asked by: MD. BADARIDDOZA KHAN, BHOLA SINGH, C. N. JAYADEVAN, GEETHA KOTHAPALLI, BANSHILAL MAHTO, P.K.SREEMATHI TEACHER, N.K. PREMACHANDRAN, P. KARUNAKARAN, (SMT.) RATNA DE(NAG), CHINTAMAN NAVSHA WANAGA, V. PANNEER SELVAM, PREM DAS RAI

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 2845 TO BE ANSWERED ON 2 ND DECEMBER, 2016/11 TH AGRAHAYANA, SAKA, 1938

## Impact of Demonetization

2845. SHRI MD. BADARUDDOZA KHAN:

SHRI BHOLA SINGH:

SHRI C.N. JAYADEVAN:

SHRIMATI KOTHAPALLI GEETHA:

DR. BANSHILAL MAHATO:

SHRIMATI P.K.:

SHRIMATI TEACHER:

SHRI N.K. PREMACHANDRAN:

SHRI P.KARUNAKARAN:

DR. RATNA DE (NAG):

ADV. CHINTAMAN NAVASHA WANAGA:

SHRI V.PANNEERSELVAM:

SHRI PREM DAS RAI:

## Will the Minister of Finance be pleased to state:

- (a) whether the Government is aware of the hardships being faced by common people due to demonetization of currency and acute shortage of new currency;
- (c) whether the Government printed new currency notes anticipating the withdrawal of old five hundred and thousand rupees notes and if so, the details thereof and if not, the reasons therefor;
- (b) if so, the reaction of the Government in this regard and the steps taken in this regard;
- (d) the main objective behind the said move;
- (f) the other steps taken/being taken by the Government to popularise cashless transactions?
- (e) the extent to which demonetization policy has impacted the various sectors of the economy and helped in detecting black/unaccounted money; and

## ANSWER

## MINISTER OF STATE IN THE MINISTRY FOR FINANCE (SHRI ARJUN RAM MEGHWAL)

- (a) & (b) Following the cancellation of legal tender character of old banknotes of high denomination, a number of measures have been announced by the Government,

taking into consideration the inconvenience caused to various sections of public due to demonetization. Information regarding measures taken by Government is available at finmin.nic.in.

(c) & (d) It  is  a  prevalent  practice  to  change design of notes from time to time and/or introduce/withdraw denominations of banknotes. Accordingly, in compliance of relevant provisions of RBI Act, 1934 the design of Rs. 500 was changed. The previous highest denomination of Rs. 1000 was introduced in the year 2000. Due to persistent moderate to high inflation since then, the value of the same has been progressively eroded in Purchasing Power Parity (PPP) terms. Simultaneously, disposable income levels and GDP also continued to grow. This factor along with rising requirement for banknotes  was  the  reason  for  introduction  of  banknote  of  Rs.  2000  denomination which was done following provisions of RBI Act, 1934. In view of such circumstances, the introduction of Rs. 2000 denomination banknotes was found suitable to the need of currency demand persisting in the country.

(e) Cash transactions do not leave any audit trail and therefore act as conduit for  black  money,  which  cast a long  shadow  of  the  parallel  economy  on  our  real economy. Elimination of black money will eliminate the long shadow of the parallel economy on our real economy and will be very positive for India's growth outlook.

(f) Various steps have been taken to popularise cashless transactions viz., waiving the MDR charges till 31.12.2016 by the banks to promote greater use of Debit cards, reducing the USSD charges by TRAI from the current Rs. 1.50 per session to Rs. 0.50 per session for transactions relating to Banking and Payments and waiver of the same by the telecom companies until December 31, 2016, not to levy service char ge of Rs. 20 for second class and Rs. 40 for upper classes on purchase of reserved Etickets upto 31 st December, 2016 and  encouraging public to use balances in bank accounts  to  pay  for  their requirements  by  cheque  or  through  electronic  means  of payments  such  as  Internet  banking,  mobile  wallets,  IMPS,  credit/debit  cards  etc. Further, all Government  organizations, public sector undertakings and other Government authorities  have  been  advised  to promote the  use  of digital  payment methods. Further details are available at finmin.nic.in .

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