BRICS BANK CHIEF HAILS DEMONETISATION
BRICS BANK CHIEF HAILS DEMONETISATION
BENEFITS OF THE MOVE
K . V . Kamath
Winner Lifetime Achiebvement ET Awards for Corporate Excellence 2016
Mr . K . V . Kamath , exchairman of ICICI Bank and presently Chief of BRICS Bank China has w e l c o m e d t h e demonetisation move of the Indian Government . In his views note-ban is likely to bring Rs . 2.5 lakh crore windfall for t h e g o ve r n m e n t i n addition to a lower
interest rate regime for a prolonged period , better tax compliance and recapitalisation of battered state-run banks . This will increase digital banking and help the government track the flow of funds through big data analytics .
This move was needed to address the issue of corruption in the country . The issue of
counterfeit money is important but secondary . If the game is also to compress the amount of currency in circulation and move things . digitally , the government is possibly holding lot of cards in its hands .
There will be an impact on interest rate and inflation . Ultimately this will drive the economy . Interest rate should decline by as much as 100 basis points over a six month period . It would be a mistake to think that black money was static . “ Infact , black money gets converted into white and then into black several times a day . This money has been intermingling all the time , which is where the problem has risen .”
DAMAGE TO THE ECONOMY
Short-term pain is there due to rupee-ban . It will i m p a c t i n t e r e s t r a t e a n d i n f l a t i o n . Unemployment will increase and purchasing power in the hands of working population will decrease . All the black money may not comeback to the banking sector . Out of `16 lakh crore being sucked out only a part will be reported for taxation . It is better to get taxed even a quarter of rd whole lot . If the black money is 1 / 3 and tax is 50 %, it would be now `2.5 lakh crore as new tax receipts . High value transactions could not be tracked so far but with the digitization going on and use of PAN cards can help us track some part of it . Honest tax payers would welcome better tax compliance and authorities would be assisted by technology . The tools for tracking are there with the government for a cleaner set-up .
INTERNATIONAL IMPACT
This move is well received internationally . The whole climate is against things which were taken for granted over the last few years . Governments are failing in several parts of the world on the issue of corruption and if somebody is fighting for ending corruption , it will be saluted and heralded . It takes enarmous courage to do so , which our Prime Minister has got . Enough people would argue that there are challenges , but somebody has to show courage and take action . This can drive the economy to new heights .
IMF SUPPORTED INDIA ' S EFFORTS
The International Monetary Fund commented in Washington on November 10 , that it supported India ' s efforts to fight corruption through the
Economic Challenger // ISSN 0975-1351 / Jan . -March. 2017 Brics Bank Chief Hails Demonetisation 3