Finance Minister Arun Jaitley said on Friday that a cash crunch caused by ban on old currency notes Rs 500 and Rs 1000 denominations will ease after December 30 as new currency will make it to market in adequate amount.
Speaking at a media conclave on Friday, Jaitley said that even though the amount of new banknotes being released would not be the same as that circulating before demonetisation, the push towards cashless economy should make up the gap.
Prime Minister Narendra Modi on November 8 discontinued 87 per cent of Indian currency worth an estimated Rs 17 trillion when he demonetised old Rs 500 and Rs 1000 banknotes.
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 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.
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."
Jaitley on GST
The finance minister 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 September 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."
Jaitley is scheduled to attend crucial GST Council meet in New Delhi on Friday 3pm.