(Adds comments on GST, background)
By Rajesh Kumar Singh
NEW DELHI Dec 2 Indian Finance Minister Arun
Jaitley said on Friday that a cash crunch following the
scrapping of high-value banknotes would ease by Dec. 30 with the
release of new 500 and 2,000 rupee notes.
Jaitley said, however, that the amount of new banknotes
being released would not be the same as that circulating before
Nov. 8, when Prime Minister Narendra Modi announced the
so-called demonetisation to purge the economy of illicit "black
Modi, at a stroke, removed from circulation banknotes worth
an estimated 17 trillion rupees ($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 Dec. 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 such as debit cards and mobile wallets.
"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.
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.
The dislocation resulting from the cash swap has been huge -
workers seeking to collect their monthly pay have been turned
away as banks ran out of cash, while car makers have reported a
steep downturn in their November sales.
"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."
For a take a look on the chaos created by the demonitisation
Jaitley also repudiated a call by the left-wing government
of India's state of West Bengal to delay a planned Goods and
Services Tax (GST) to avoid inflicting another economic shock in
the wake of demonetisation.
He said the plan was still to launch the new tax on April 1.
Time was tight because, under a constitutional amendment that
enabled the GST, India's old system of indirect taxation would
lapse next September.
"If on Sept 16, 2017, there's no GST, then there's no
taxation," he said. "Our intention is to make sure it gets
implemented from April 1, 2017."
($1 = 68.3450 Indian rupees)
(Reporting by Rajesh Kumar Singh; Writing by Douglas Busvine;
Editing by Simon Cameron-Moore)