BLACK BOOK:

CHAPTER 1: INTRODUCTION

1.1 MEANING OF DEMONETIZATION:

According to Merriam Webster Dictionary, the term demonetization has its root
word from verb demonetize. Demonetization is a word which has various
meanings. It is essential whenever there is the need to change national currency.
Here the old unit of currency is replaced with a new currency unit. Actually, it
is a medium of payment which is recognized by a legal system. Paper currency
and coins are common forms of legal tender in many countries. Legal tender is
variously defined in different jurisdictions. Central government is replacing the
old Rs. 500 notes with newer ones and also doing away with Rs. 1000 notes. It
is actually scrapping of certain notes from the circulation for different purposes.

Demonetization is the act of stripping a currency unit of its status as legal

tender. It occurs whenever there is a change of national currency. The current
form or forms of money is pulled from circulation and retired, often to be
replaced with new notes or coins. Sometimes, a country completely replaces the
old currency with new currency.

Demonetization occurs when a government removes a currency’s legal

tender status, which means the money is no longer officially recognized as a
medium of exchange for meeting financial obligations or settling debts.
Typically, old notes are retired and replaced with new ones. In cases where the
intent is to stop corruption, demonetization usually targets only large-
denomination banknotes. By contrast, if the intent is to cut zeros from existing
price levels, introduce policies that dramatically reduce hyperinflation rates,
and/or restore public confidence in the monetary system, a government may
demonetize by introducing a totally new or renamed currency

The opposite of demonetization is remonetisation, in which a form of payment

is restored as legal tender. Removing the legal tender status of a unit of currency
is a drastic intervention into an economy because it directly effects the medium
of exchange used in all economic transactions. It can help stabilize existing
problems, or it can cause chaos in an economy, especially if undertaken
suddenly or without warning. That said, demonetization is undertaken by
nations for a number of reasons.
1.2 HISTORY OF DEMONETIZATION:

The Coinage Act of 1873 demonetized silver as the legal tender of the United
States, in favour of fully adopting the gold standard, in order to stave off
disruptive inflation as large new silver deposits were discovered in the
American West. Several coins, including two-cent piece, three-cent piece, and
half dime were discontinued. The withdrawal of silver from the economy
resulted in a contraction of the money supply, which contributed to a recession
throughout the country. In response to the recession and political pressure from
farmers and from silver miners and refiners, the Bland-Allison Act remonetized
silver as legal tender in 1878.

Mikhail Gorbachev’s Government in 1991, demonetized ruble bills of the

Soviet Union, the 50s and 100s. Although it was not somehow successful,
however in August 1991, attempt to lead to a successful redenomination of the
ruble in 1998 where 3 zeros were removed, which was followed by another
currency switch in 2010 when 2 more zeros were removed from the old
currency.

An example of demonetization for trade purposes occurred when the nations of

the European Union officially began to use the euro as their everyday currencies
in 2002. When the physical euro bills and coins were introduced, the old
national currencies, such as the German mark, the French franc, and the Italian
lira were demonetized. However, these varied currencies remained convertible
into Euros at fixed exchange rates for a while to assure a smooth transition.

The demonetization that happened in North Korea in 2010 left people with no
food and shelter. Dictator Kim-Jong II introduced a reform that knocked off two
zeros from the face value of the old currency in order to banish black market.
In a more modern example, the Zimbabwean government demonetized its dollar
in 2015 as a way to combat the country’s hyperinflation, which was recorded
at 231,000,000 percent. The three-month process involved expunging the
Zimbabwean dollar from the country’s financial system and solidifying the.
U.S. dollar, the Botswana pula, and the South African rand as the country’s
legal tender in a bid to stabilize the economy.

1.3 NEED FOR DEMONETIZATION:

Demonetization has been used to stabilize the value of a currency or

combat inflation. Some countries have demonetized currencies in order to
facilitate trade or form currency unions. Demonetization has been tried as a tool
to modernize a cash-dependent developing economy and to combat corruption
and crime (counterfeiting, tax evasion).

1.4 DEMONETIZATION IN INDIA:

 History of Demonetization in India

The first instance was in 1946 and the second in 1978 when an ordinance was
passed to phase out notes with denomination of Rs 1000, Rs 5000 and Rs
10000. Last November, PM Modi made announcement that high denomination
notes would stop being legal tender from 9th November 2016.

 Demonetization of 1946
In 1946, the currency notes of Rs 1,000 and Rs 10,000 were removed from
circulation. The ban really did not have much impact, as the currency of such
higher denomination was not accessible to the common people. However, it
severely impacted functioning of State Bank of India as there were only 71 bank
offices at that time. The bank’s profits also took a hit and they were low as
compared to that of previous years. The stock market rallied for two continuous
years post the demonetisation reflecting impact on economic activity. Both the
notes were reintroduced in 1954 with an additional introduction of Rs 5,000
currency. Rs 500 and Rs 1000 notes were introduce in 1934 and after four years
in 1938, Rs 10,000 notes were introduced.

 Demonetization of 1978

In 1978, the then Prime Minister of India, Morarji Desai announced the
currency ban taking Rs 1000, Rs 5000 and Rs 10,000 out of circulation. The
main aim of the currency ban was to curb black money generation in the
country. Similar to the recent episode, this action was kept confidential and yet
an ordinance was issued to carry out the exercise. However, that ordinance
contained sufficient measures for the exchange of the old notes and clearly
stated the power of central government in framing of the rules. There was a
political angle involved in 1978 demonetisation as the then newly formed Janata
government wanted to target some of the alleged corrupt elements in the
government. The impact of currency ban on common people was limited as the
demonetised notes formed only a small portion of the total money supply.

 Demonetization of 2016

In November 2016, the Indian government decided to demonetize the five

hundred and one thousand-rupee notes, the two biggest denomination notes. It
was estimated that almost 86% of the country cash supply included these two
notes. The aim of the central government was to eradicate black money,
counterfeit currency, fight for evasion and terrorist financing. It also included
people to be more digitally advanced and to adopt a cashless economy.
Countries like Zimbabwe, Australia, North Korea, Ghana, Nigeria, Pakistan etc
are also on the list of countries which have practiced demonization. Known to
be as a historic move, we can say that India is stepping towards cashless age.
The main motto of why demonetization is done periodically that to eradicate
black money, black marketing, corruption, counterfeiting etc. As Rs 1,000 and
Rs 500 notes constituted almost 86% of the total currency, one economist
compared the pain of common people by stating what if 86% of their blood was
removed from their bodies. The government, given the constitutional provision
of right to life, permitted use of old notes in government hospital for medical
treatment and buying medicine with doctor’s prescription, and making
payments for milk and utility bills. To ensure convenience and freedom of
travel within the country, purchase of tickets for railway, bus and air travel were
permitted with old notes, and toll on highways was exempted. Similarly, grace
period was offered on purchase of petrol, diesel, and gas and LPG gas cylinders
for cooking. To ensure comfortable international travel, use/exchange of old
notes at international airports was also permitted. In view of sowing season, old
notes were permitted to be used for purchase of seeds. For general convenience
payment of school fees as well as provisions for marriage functions were also
made. The Post Offices which have a significantly larger presence in rural areas
than commercial banks were also permitted to exchange old notes. To address
the emerging issues, given that 86 percent of the currency was demonetised, 126
amendments were introduced in the course of 51 days. A final piece of the
demonetization plan was set on December 28, 2016, when the government
passed its Specified Banks Notes (Cessation of Liabilities) Ordinance, thereby
eliminating the Reserve Bank of India’s liability for these defunct notes.
1.5 IMPACT OF DEMONETIZATION:

On 8th November 2016, the Indian government decided to demonetize the 500-
and 1000- rupee notes, the two biggest denominations in its currency system;
these notes accounted for 86 percent of the country’s circulating cash. With
little warning, India's Prime Minister Narendra Modi announced to the citizenry
that those notes were worthless, effective immediately – and residents were
given until December 30 (i.e., 50 days later) to deposit their old, invalid notes or
convert them. Coincident with the elimination of the ₹500 and ₹1,000 notes
was the issuance of new ₹500 and ₹2,000 notes. Modi’s announcement sent
shock waves through the nation, and for good reason: The old ₹500 and ₹1,000
currency notes made up slightly more than 86% of India’s total currency in
circulation; more than 90% of the nation’s financial transactions were
conducted in cash; more than 85% of India’s workers were paid in cash, and,
finally, about 50% of the nation’s population were unbanked—they didn’t have
even the most basic checking account. On one side, the International Monetary
Fund and many knowledgeable analysts praised the move as a major step to
reduce underground activity, while other, equally respected and knowledgeable
analysts, including Nobel Laureate Amartya Sen and former prime minister
Manmohan Singh, considered demonetization to be unfair and riddled with
potential problems.

Chaos ensued in the cash-dependent economy as long, snaking lines formed

outside ATMs and banks, which had to shut down for a day. The new rupee
notes have different specifications, including size and thickness, requiring re-
calibration of ATMs: only 60 percent of the country’s 200,000 ATMs were
operational. Even those dispensing bills of lower denominations faced
shortages. The government’s restriction on daily withdrawal amounts added to
the misery, though a waiver on transaction fees did help a bit. Small businesses
and households struggled to find cash and reports of daily wage workers not
receiving their dues surfaced. The rupee fell sharply against the dollar.

Stopping or slowing the growth of India’s illegal underground activities was a

desired goal because they undermine the nation’s moral fabric, but as a matter
of social fairness, the government’s intent was broader, aiming to expose both
the legal and illegal layers of its informal economy. Currently, fewer than 4%
(and perhaps as low as 1%) of India’s population pays taxes. By making the
₹500 and ₹1,000 notes illegal, Modi hoped that India’s thriving informal
economy might be forced into the light. Individuals who exchanged excessive
amounts of old notes would be required to explain their sources. Old currency
notes that were held beyond the deadline would lose their value, and those who
continued to use, transfer, receive, or even hold the old banknotes would be
subject to fines of either ₹10,000 or five times the value of the banknotes. By
promoting the use of checks, credit cards, and other forms of electronic
payments, demonetization might make underground transactions more difficult
to hide. And, if demonetization was able to broaden the nation’s tax base and
increase government revenues, it held the potential to reduce Indian tax rates,
which could increase domestic investments and spur meaningful growth. Years
after India’s momentous demonetization, the government continues to expand
options for digital payments to reduce the economy’s dependence on cash. The
recent data shows that new digital payment methods are building momentum.
These innovations offer simple, universal tools that may help India to reach a
cashless economy. The impact of demonetization on the Indian economy can
briefly be addressed as follows: -
  Political Impact: -

The political impact of demonetization was felt by the whole country with
majority of the educated people offering support to the demonetization. There is
a growing support for the government from the educated people and especially
the youth for the bold step taken to curb black money. Opposition parties
strongly opposed the demonetization implementation process.

 Social Impact: -

The banning of Rs.500 and Rs. 1000 notes were released suddenly and the
worst affected was the common man. Problems were numerous and
disproportionately borne by those without access to credit cards or formal
financial intermediation services. Salaried employees faced the issue on the
opening day of the month with their salaries credited in the bank account but
they were able to withdraw only 2,000 rupees from the ATM machines. Many
salaried people have gone to the bank branch to withdraw their full salary
amount with loss of pay. Social problems in the form of road blockades and
quarrels arouse with people waiting in long queues before the banks and ATM
machines. People become restless spending an entire day to withdraw money.
Several deaths have been registered as a result of waiting in long queue.
Pensioners are affected with no special provisions made for senior citizens in
banks. The impact on the health care sector was huge with hospitals refusing to
accept the old currency. The common man faced severe issues transacting in the
hospitals with old currencies and several cases of death had been registered for
not attending the patients due to demonetization. However, the impact on
educational sector was very less as all the universities and colleges have been
instructed to enable online transactions in their official websites. But still a lot
of black money was retrieved from the educational institutions through income
tax raids which was received as donations from students and hoarded as black
money Demonetization has brought the trafficking of women and girls for sex
work to a stop. It has been estimated that this has been a Rs 24 trillion industry
in India. The demonetization of Rs 500 and Rs 1000 notes to crush back
economy came at a wrong time for farmers. Millions of farmers were unable to
get enough cash to buy seeds and fertilizers for their winter crops. Production of
essential commodities was under threat hurting farmers who were just
recovering from the two-year drought. India's 270 million farmers live mostly in
the cash economy.

 Economic Impact: -

The role of Reserve bank of India was very important in this cleanliness drive.
A positive and warm response was received from the banking experts. Both
private and public sector are facing severe issue of NPA (Non-Performing
Assets) or bad loans. It has expected that demonization will help the banks to
recover bad loans and will improve their financial position. Demonetization will
lead to increase in formal banking sector which will result in transparency.
From 4% to 28% this jumped in figure has been recorded by the Income Tax
Department in regard of paying taxes by people. When black money within
India gets curbed, it will result in the overall economic development of the
nation. Demonetization also tackled an economic distortion that currently
favours India’s low-productivity, informal sector. High-productivity sectors,
such as those in which multinational firms and export-oriented domestic
companies compete, are visible and, therefore, less able to escape taxes. By
bringing the informal economy above ground and taxing it at reasonable rates,
demonetization could bring symmetry to India’s tax-based incentive structure.
As a result, relative underground returns should fall, supplying more capital to
relatively high-productivity sectors and, thereby, stimulating the nation’s
growth and development. Demonetization is viewed as a measure of sterilizing
the money. RBI plays the pivotal role in this demonetization drive. All the
banking experts welcome this demonetization measure. Considering the entire
economy of India as a whole, demonetization will make most of the transactions
to be done through the formal banking sector.

1.6 REASON WHY INDIAN ECONOMY SHOULD GO DIGITAL?

In the recent years, the emphasis to go digitally advance has been improved
because of financial inclusion. Financial inclusion is the foremost policy
challenges India is facing today. Approximately 61% of India's population had
access to formal financial services. Just because of this, Central government had
taken major steps in order to include a greater percentage within the umbrella of
formal financial services. One of the most famous initiatives in this regard is the
Pradhan Mantri Jan Dhan Yojna (PMJDY). PMJDY has done a commendable
job of opening approximately 28.68 crore bank accounts and the goal of
including over 90% of undeserved sections of the society in the ambit of formal
finance in 2021. Digitizing India’s transactions also might increase the supply
of credit and lower interest rates. Currently, a huge swath of India’s population
has little or no access to the nation’s institutional credit markets. As a result, a
significant amount of financial capital is locked outside formal financial
networks. If demonetization improves electronic payment systems and
encourages residents to use India’s financial intermediaries, it could unlock this
potential by supplying funds for domestic investments.
1.7 CASHLESS ECONOMY IN INDIA:

A cashless economy is one in which all the transactions are done using cards or
digital means. The circulation of physical currency will become minimal and
there by reduced instances of tax avoidance because it is financial institutions-
based economy where transaction trails are left. It will also curb generation of
black money and will reduce real estate prices because of curbs on black money
as most of black money is invested in Real estate prices which inflates the
prices of Real estate markets. It will pave way for universal availability of
banking services to all as no physical infrastructure is needed other than digital.
Payments can be easily traced and collected, and corruption will automatically
drop. The Digital India is a flagship program by the Government of India with a
vision to transform India into a digital society and knowledge economy.
―Faceless, Paperless, Cashless is one of professed role of Digital India. India
continues to be driven by the use of cash; less than 5% of payments happen
electronically, however the finance minister, in the budget speech, spoke about
the idea of making India a cashless society, with the aim of mopping black
money. Government on its part is working at various levels to reduce the
dependence on cash. National Payments Corporation of India (NPCI) was set up
by Indian banks under the protection of the Indian Banks’ Association and the
guidance of the RBI to provide centralised infrastructure for various retail
payment systems in the country, including card payments. NPCI is expected to
bring greater efficiency by way of uniformity and standardization in retail
payments and expanding and extending the reach of both existing and
innovative payment products for greater customer convenience. Though it will
take time for moving towards a complete cashless economy, efforts should be
made to convert urban areas as cashless areas. As 70% of India’s GDP comes
from urban areas if government can convert that into cashless it will be a huge
gain. The recently launched Unified Payments Interface by National Payments
Corporation of India makes digital transactions as simple as sending a text
message. The government has announced incentives including waiving service
taxes on digital payments, discounts on purchases (petrol, railway tickets,
highway tolls), and more. A high-level committee of chief ministers has been
formed to develop a roadmap for increased use of digital payments in the
economy. Even the RBI has also recently announced a document — “Payments
and Settlement Systems in India: Vision 2018” —with a plan to encourage
electronic payments and to make India to move towards a cashless economy in
the medium and long term. The different methods of digital payments are: a.
Immediate Payment Service (IMPS) is an instant interbank electronic fund
transfer service through mobile phones. It is also being extended through other
channels such as ATM, Internet Banking, etc. b. A Unified Payment Interface
(UPI) is a single window mobile payment system launched by the National
Payments Corporation of India (NPCI). c. Any card issued against a depositary
account, such as an ATM card or a debit card. Sometimes the phrase is also
used to refer to Visa and Mastercard, since these are also issued by banks, but
they are credit cards and not linked directly to a depositary account. d. Mobile
banking refers to the use of a smartphone or other cellular device to perform
online banking tasks while away from your home computer, such as monitoring
account balances, transferring funds between accounts, bill payment and
locating an ATM. The different methods of digital payments are:
a. Immediate Payment Service (IMPS) is an instant interbank electronic fund
transfer service through mobile phones. It is also being extended through other
channels such as ATM, Internet Banking, etc.

b. A Unified Payment Interface (UPI) is a single window mobile payment

system launched by the National Payments Corporation of India (NPCI).

c. Any card issued against a depositary account, such as an ATM card or a

debit card. Sometimes the phrase is also used to refer to Visa and Mastercard,
since these are also issued by banks, but they are credit cards and not linked
directly to a depositary account.

d. Mobile banking refers to the use of a smartphone or other cellular device to

perform online banking tasks while away from your home computer, such as
monitoring account balances, transferring funds between accounts, bill payment
and locating an ATM.

Average Transaction size of Digital Payments

Digital Banking December 2011 November 2016

IMPS 8266 8980
CARDS 2962 3150
UPI 1452 1714
MOBILE BANKING 7204 17207
Source: RBI website

The above table shows the average transaction size of Digital payments during
December 2011 and November 2016. It is understood from that the mobile
banking has been the widely used mode of digital banking after demonetization
in India.
Benefits of Cashless Economy: -

 In Financial year 2015, RBI spent Rs. 27 billion on just the activity of
currency issuance and management. This could be avoided if we become
cashless society
 It will pave way for universal availability of banking services to all as no
physical infrastructure is needed other than digital.
 There will be greater efficiency in welfare programmes as money is wired
directly into the accounts of recipients. Thus, once money is transferred
directly into a beneficiary’s bank account, the entire process becomes
transparent. Payments can be easily traced and collected, and corruption
will automatically drop, so people will no longer have to pay to collect
what is rightfully theirs.
 There will be efficiency gains as transaction costs across the economy
should also come down.
 1 in 7 notes is supposed to be fake, which has a huge negative impact on
economy, by going cashless, that can be avoided.
 Reduced costs of operating ATMs.
 Speed and satisfaction of operations for customers, no delays and queues,
no interactions with bank staff required.
 Reduction of tax avoidance because it is financial institutions-based
economy where transaction trails are left.
  It will curb generation of black money.
 Will reduce real estate prices because of curbs on black money as most of
black money is invested in Real estate prices which inflates the prices of
Real estate markets.
 The recent waiver of service tax on card transactions up to Rs 2,000 is
one of the incentives provided by the Central government to promote
digital transactions in country. This has been followed by a series of cuts
and freebies.
 Heavy discounts and offers on many Government control sectors such as
railway ticking, railway catering, highway tolls, insurance policies, fuels
etc.

1.8 BLACK MONEY AND DEMONETISATION:

Along with other cleanliness drives conducted by the Government of India,

'Demonetisation' was known to be as the biggest notable cleanliness drive
against the black money in the history of our Country. Even if we talk about our
social, economic and political aspects of our country, the main drawback in
flourishing of our country is the dissemination of black money which caused
debilitating effect on the public policies and the institutions of our country.
Black money and false currency lead to increase in terrorism, crime and
corruption. As of 2015-2016 statistics shown by Reserve Bank of India
rulebook, a total of Rs. 16.42 lakh crore worth of currency was in circulation as
at end April 2016. Out of this, Rs. 14.18 lakh crore was in from of Rs. 500 and
Rs 1,000 denomination notes represent about 2300 crore notes, which were
about 26 percent of total notes in circulation.
Many solutions are being drawn but the best solution to counter with black
money is the digital transactions or cashless transactions because the more
physical presence of currency causes more chances to hide it. Credit/debit
money, money wallets, cheques etc are various ways of cashless transactions.
As everyone knows India is a diversified country with people of different
customs and religions are living so it will take some time to literate people
about the usage of the cashless transactions. After having cashless, Corruption
will also be automatically reduced by removing black money from economy.

1.9 LEGAL FACTS ABOUT DEMONETIZATION IN INDIA:

According to law, the legal basis for the order demonetizing currency can be
found in Section 26 of the Reserve Bank of India Act, 1934. Under sub-section
(2) of this Section, the Union Government is given the power to declare that any
notes issue by the Reserve Bank will no longer be legal tender. The only
procedural requirement is that the Board of the Reserve Bank of India
recommends the same to the Union Government. In fact, in 1978,
demonetization was carried out under a special legislation, namely the High
Denomination Bank Notes Act, 1978. However, the constitutional validity of
this law was challenged before the Supreme Court of India in Jayantilal
Ratanchad Shah v s Reserve Bank of India on the basis that it was a violation of
the right to carry out trade and commerce, and in addition, amounted to a
compulsory acquisition of property without compensation by the Government.
But the Supreme Court of India did not find the mechanism for return of the
high denomination to be unreasonable or in any way arbitrary or
unconstitutional.

NOTE:
If we compare the situations between 1978 and 2016, there are vast differences
in the economic scenario in India between 1978 and 2016.

The value of high denomination notes in circulation 1978 was a mere Rs 131
crores – unlike the present situation where the value of high denomination notes
in circulation is Rs 14.18 lakh crore or 85 % of the value of all notes in
circulation.

1.10 INDIAN ECONOMY SINCE DEMONETIZATION:

The unique experiment with demonetisation, announced on November 8, 2016

by the Prime Minister has established that the Central Government is serious
about tackling the menace of corruption. The relentless fight against corruption
was further reflected in the Union Budget of February 1, 2017 through
restrictions on funding of political parties and on cash transactions; and the
financial budget of the preceding year included some extensive provisions to
push infrastructure for digitalization as well. The experiment of demonetisation
by the Government has largely been successful in educating the masses about
the benefits of electronic payments and digitalization.

Initially, broadly, demonetisation of high currency notes had a two-fold

objective – first, choking the funding channels of militancy and terrorism from
across the border and to fight corruption. Since then, in continuing the focus on
corruption, government has placed emphasis on digitizing India.

The number of demonetised notes which subsequently returned to the Reserve

Bank of India (RBI) between November 8 and December 31, 2016 strongly
demonstrate that corruption is rampant in the economy. The eradication of
corruption is not only a social necessity but also has strong economic rationale.
The war against the malaise of corruption has to go beyond a series of surgical
strikes and needs precise planning with scenario analysis, and then flawless
execution. In that respect, demonetisation of November 2016 deserves a
contextual review wherein the government may consider strengthening efforts
to eradicate corruption from an exclusively tax-oriented approach to a broad-
based approach. Prevention of corruption needs strong policy deterrence which
requires effective administration, and technology-based data processing to
generate actionable intelligence.

1.11 INDIA, A TAX NON-COMPLIANT SOCIETY

In India, tax to GDP ratio at 18 percent is nearly half that of advanced countries.
The low tax to GDP ratio is mainly because India remains a tax-non-compliant
society as the number of income-tax payers has been generally low over the
years. In a population of 1.2 billion, there are just about 37 million people filing
individual tax returns. Of these, only 7.6 million people declare income above
Rs.5 lakh, with salaried class accounting for 5.6 million people. In India, only
20 lakh people claim income above Rs.50 lakh. Still interestingly, of the 56
million informal sector individual enterprises, only 18 million file returns. And,
of the 1.4 million registered companies only 0.6 million file returns, and
companies showing profit of more than Rs. 1 crore are just about 36,448.4 This
trend continues in spite of the country having a large market for luxury villas
and cars; ever rising gold demand; booming stock market; and a large number
of high net worth individuals.

However, after demonetisation, the number of returns filed as on August 5,

2017 were 24.7 percent higher compared to previous year. Advance tax
collections of Personal Income Tax grew by 41.79 percent over the last year.
Personal income tax under Self-Assessment Tax grew at 34.25 percent over the
last year. Hence, demonetisation seems to have worked in making India more
tax compliant and giving our fiscal policy more bandwidth.

The jolt of demonetisation to push this ratio up probably proved out to be a big
boon. Yet, the Economic Survey (February, 2018) highlighted two
macroeconomic vulnerabilities of India- fiscal and current account
frugality/prudency- which requires breaking the inertia of tax to GDP ratio.
Sadly, India’s tax to GDP ratio hasn’t been growing fast enough given that in
last 45 years it has seen an increase of just 7 percent. There is certainly
something wrong in tax collection, both direct and indirect.