Wednesday, September 27, 2017

India's post-demonetisation policy agenda

My latest work with V Ananthanageswaran examines the policy agenda for the Government in the aftermath of the demonetisation and the efforts to clamp down on black money and shrink the informal economy. Please read the abstract here and the full report here

2 comments:

Anonymous said...

Gulzar,

Just a clarification - How does demonetisation help formalise the economy? Is it through the mechanism of uptake of digital transactions, which can be traceable and hence are taxable? If that is so, the digital transaction figures are back to the trend line!

Any reason other than the mechanism of digitisation of transactions?

Wasn't the pressure to formalise anyways going to happen through GST?

Gulzar Natarajan said...

Thanks Anon for the comment.

The report is not a defence of demonetisation. But demonetisation having taken place, it argues that it is incumbent on the government to make the decision count in formalising the economy (one of the stated objectives).

Traceability is useful not only for taxation, but improving transparency, enhancing productivity, establishing credit worthiness, and so on.

If digital transactions are back to the trend line, it means nothing. It only underscores the importance of complementary measures to ease regulations on digital finance and making it less costly. We need to take much longer time horizon views in such cases.

Formalisation of transactions involves pulling multiple levers, GST being one. The others like EIN are discussed in the report.