After political dividends, notebandi can also yield economic dividends–S A Aiyar–Economic Times–17.08.2017

The Survey estimates that DM accounted for 0.54 million of the increase. Income taxpayers totalled barely 30 million before Modi came to power. So, the additions since then are very impressive. However, the average income reported by newcomers in 2016-17 was only Rs 2.7 lakh. The big fish have not been netted.

Net tax collections in the first quarter of 2017-18 rose 14.8%, faster than nominal GDP. DM aided this improved compliance.

Cashing Out
A secondary objective of DM was to shift from cash to digital transactions, and from the informal to the formal sector. (This will be greatly buttressed by GST.) Before DM, India’s cash-GDP ratio of 12% (and rising) was among the highest globally. DM caused the ratio to crash in December 2016, followed by partial recovery.

In June 2017, currency was Rs 3.5 lakh crore, or 20%, below the earlier trend. Digital transactions showed a similar encouraging trend. If these trends are sustained — which is not yet certain —that will mean major progress.

Black money operators keep few of their billions in cash. Almost all is in assets yielding returns. DM has barely touched the black hoard. Nor can it stop fresh black money generation without several supporting reforms.

Knowing this, Modi has gone for supporting measures, such as the benami property law, crackdown on shell companies, income-tax amnesties and cut in the first income tax slab to 5% (making honesty cheaper). AroundRs 800 crore of property has been seized under the benami property law, and 1.75 lakh shell companies have been de-registered. Between April 1 and August 5, 5.5 million newcomers filed income-tax returns, against 2.2 million in the same period last year. GST will also improve compliance.

Modi came to power promising jobs for all and good governance. He has failed dismally to accelerate formal sector employment. Wages for casual labour have risen substantially, suggesting improved job conditions in the informal sector. But overall employment has been an area of failure for Modi.

Hence, he has shifted focus to his other main promise: better governance. He has successfully projected himself as the first Prime Minister for decades to be serious about integrity. He cannot end corruption in the bureaucracy or state governments (which account for 62% of government spending and over 90% of governmental contact with citizens).

But DM is one of many measures that have convinced voters that Modi is serious about raising moral standards in business and politics. That has already yielded political dividends. If sustained, it will also yield large economic dividends.