India's Finance Minister Arun Jaitley said on Friday (Dec 2) that a cash crunch following the scrapping of high-value banknotes would ease by December 30 with the release of a significant part of new replacement currency.
Jaitley, however, said that the amount of cash to be issued in the form of new 500 and 2,000 rupee notes would not be the same as the amount circulating before November 8, when Prime Minister Narendra Modi announced the so-called demonetisation.
'Obviously, one of the advantages of this exercise is going to be that you won't have the same level of paper currency which existed,' Jaitley told the Hindustan Times Leadership Summit in New Delhi.
Officials expect some illicit cash never to be returned and to expire worthless, while other money that is deposited will remain in the banking system. The government's goal is to encourage the use of cashless forms of payment, a challenge for most Indians who live and work in the informal economy.
'It does create a disruption,' said Jaitley. 'But I don't see the disruption lasting for very long. You may see some impact for a quarter or so.'
'Demonetisation is the new normal confronting black money which was a norm in India for seven decades,' Jaitley said.
'Black money has been a norm in India for seven decades, we want to confront it and create a new normal,' the finance minister said.
He said the demonetisation move would ensure that political funding become 'transparent'.
'Today, each person gets assessed for tax at least thrice. In future, the effort is to simplify and ensure just one assessment," he said.
Modi, at a stroke, removed from circulation banknotes worth an estimated Rs 17 trillion ($249 billion). Finance ministry sources say they plan to reissue just over half of this–a task that would take months given the capacity of India's four banknote printing presses.
Modi set a 50-day deadline that runs to December 30 for people to swap or deposit their old banknotes. He has promised the situation would stabilise by then and urged Indians to adopt cashless payment forms.
