Guest Lecture on Demonetization

The Department of Economics organized a guest lecture on “Demonetization and its contents” on 31 January, 2017. Prof. Vijay Vir Singh, Director, NITI Aayog Chair, Department of Economics, University of Rajasthan, was the guest speaker. He discussed about various positive and negative aspects of demonetization. He began the lecture by describing the important sources of revenue for the government and the impact of demonetization on these various sources. According to him, there will be higher tax revenue in the hands of government after this move. As mentioned in the Constitution, there is right to every individual being provided with minimum standard of living, and, for that government requires higher tax revenue. Almost 95% of people in India are not paying direct taxes and the share of non tax revenue is also quite negligible. Another critical target of scrapping the legal tender was to flush out black money from the economy. He shared the forecast on black economy done by Surjit Bhalla, an investment banker. According to him, there is 17% black cash in the economy. Figures given by World Bank estimate 25% black economy. Coming on to the monetary side, after demonetization, commercial banks reduced the rate of interest, while RBI has not reduced the repo rate.  He then discussed the long term and short term effects of the demonetisation. In short run, the lower income groups are the sufferers but in long run, it will hit hard on the large income groups and definitely, government will earn high tax revenue which will be further used on public expenditure. He also discussed about the political view of demonetistion by saying that all the decisions of the government were taken on the concern of politics whereas economy is the by product. He also told us that the exact impact of demonetization will be seen by 2018 and the budget that government is going to present on 1^st February 2017. The session ended with a question and answers round from the audience and it was quite insightful and knowledgeable.