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Demonetisation: States raise Concerns over Ban on Old Rs 500 and 1000 Currency Notes and its impact on State Treasuries

As much as Rs 14 lakh crore or 86 per cent of India's currency has been withdrawn and is getting replaced with new Rs 500 and Rs 2,000 rupee notes

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Indian currency notes. Pixabay

New Delhi, Nov 20, 2016: A number of states- including West Bengal, Uttar Pradesh and Tamil Nadu, today have raised the issue of demonetization of 500 and 1000 rupee notes and its impact on state treasuries along with the day-to-day sufferings of lower and middle classes related to this decision with Union Finance Minister Arun Jaitley.

Before the start of the informal meeting that was called to end the deadlock over jurisdiction over assesses under the GST regime, sources said, West Bengal Finance Minister Amit Mitra said the ban on old currency notes would trigger recession as the industrial activity would be hurt and tax collection would recede, mentioned PTI.

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Apart from other states, Tamil Nadu has also joined the group saying that the industrial activity is affected and while Uttar Pradesh mentioned that the factories in Kanpur as well as in Moradabad have closed operations.

[bctt tweet=”Prime Minister Narendra Modi on November 8 announced demonetisation of 500 and 1,000 rupee notes.” username=””]

Thomas Isaac, Kerala Finance Minister said that numerous states have “reported informally” that they have seen a “significant decline in revenues”. “If 86 per cent of your money disappears, there is a problem for the people. There is a collateral impact on investments sentiments,” Isaac told reporters.

According to the PTI report, in a major assault on black money and terror financing, Prime Minister Narendra Modi on November 8 announced demonetisation of 500 and 1,000 rupee notes and asked holders of such notes to deposit them in bank accounts.

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As much as Rs 14 lakh crore or 86 per cent of India’s currency has been withdrawn and is getting replaced with new Rs 500 and Rs 2,000 rupee notes.

All states were in agreement that their revenues will get impacted as well as the employment will be hit, but nobody demanded a roll back, mentioned sources.

While West Bengal Chief Mamata Banerjee and Delhi CM Arvind Kejriwal have been demanding a roll back of demonetisation exercise, Samajwadi Party supremo Mulayam Singh Yadav demanded a short-term roll-back of demonetisation move saying that people should be given at least a week’s time before the ban on old currency notes.

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Even though many leaders are against the PM Narendra Modi’s demonetisation move, the common folks are supporting PM Modi’s masterstroke move towards curbing illegal money problems in a large manner, mentioned PTI. Let’s just say, this issue has both positive and negative effects and more debates about the necessity of a huge decision like this will follow.

– by NewsGram with PTI inputs

 

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Demonetisation, Aadhaar Spurred Digital Payments Growth: RBI

Pointing to a major area for improvement, the study showed that only three per cent of the population in India used the Internet to pay utility bills in 2017

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long term impact on Real Estate
Demonetisation aided with RERA and GST will put long term impact on Real Estate. Pixabay.

After the demonetisation of Rs 500 and Rs 1000 notes in 2016 pushed digital payments, Aadhaar-enabled electronic know your customer (eKYC) resulted in an exponential growth of such payments in the country, according to a new report by the Reserve Bank of India.

Transactions in which both the payer and the payee use digital modes to send and receive money are referred to as digital or electronic payments.

India recorded an accelerated growth rate of over 50 per cent in the volume of retail electronic payment transactions in the last four years, said the report titled “Benchmarking India’s Payment Systems”.

The growth in 2018-19 was largely due to the steep growth in Unified Payments Interface (UPI), it added.

“In India, the smartphone revolution has seen an explosion in digital payment options, from e-Money to the Unified Payments Interface (UPI) to a combination of the two. After demonetisation, the use of e-Money picked up on a very large scale,” the findings showed.

The digital landscape changed with higher usage of e-Money, UPI, Aadhaar Payments Bridge System (APBS), RuPay, and Bharat Bill Payment System (BBPS), among others.

With 3,459 million e-Money transactions, India was only behind Japan and the US (data on China not available) in 2017 with respect to volume of e-Money transactions, the report said.

The study revealed that over the years, the number of debit and credit cards also increased considerably in India.

Aadhaar Card Reader Logo. Source: Wikimedia

India had 331.60 million and 19.55 million debit and credit cards respectively at the end of 2012. The numbers grew to 861.7 million and 37.49 million respectively at the end of 2017.

By March 31, 2019, the number of debit and credit cards issued were 925 million and 47 million, respectively.

However, the study showed that the cost of digital transactions was a factor inhibiting their growth.

Merchants have to cash out or transfer to their banks accounts at a cost and at times these costs are passed on to the consumer.

“A few countries have tried to regulate costs to ensure that the charges are not usurious, but the jury is still out on whether such a regulation promotes the growth of digital payments. With banks pushing and merchants pulling, it isn’t clear if such caps will discourage the use of cash,” the report added.

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Pointing to a major area for improvement, the study showed that only three per cent of the population in India used the Internet to pay utility bills in 2017.

The report compared the payment ecosystem in India with the systems and usage trends in other major countries such as Australia, Brazil, Canada, China, France, Germany, Britain and the US. (IANS)