As long queues return, Arun Jaitley admits pain' may last longer

New Delhi/Bhubaneswar: Union finance ministry Arun Jaitley admitted on Thursday that hardships being faced by people due to a massive cash crunch would remain for “one or two quarters”, but sought to assure that the government’s demonetisation drive would boost India’s economy in the long run.  

The government’s shock move on November 8 to spike Rs 500 and Rs 1,000 notes — fiercely criticised by the Opposition parties — immediately left millions cashless. But as salaries got credited, banks and ATMs battled bigger crowds on Thursday with little or no cash to manage them.

Anger rose among millions as a person can for now withdraw only Rs 24,000 per week through all withdrawals, but banks were forced to reduce the limit in some cases. These are the first salaries credited since the two largest bills — 86 per cent of the total cash in circulation — were withdrawn. Prime Minister Narendra Modi had claimed the crisis would not last more than 50 days.

People struggled to pay their domestic helps, drivers and grocers, as many of them would not be able to accept card payments, but several banks and ATMs were found shut. Many branches are yet to get the new Rs 500 notes, while the Rs 100 notes are in short supply. People are also reluctant to accept the new Rs 2,000 notes.

Speaking at an event in Bhubaneswar, Mr Jaitley said once the demonetisation process was complete, India’s gross domestic product (GDP) and tax base will expand significantly. “The money coming to the banks will be used more fruitfully for the benefit of the economy,” he said on the sidelines of the Make in Odisha conclave.

The Centre also explained to the Supreme Court on Thursday about steps taken to ease the cash crunch. The court would hear the matter on Friday.

Mr Jaitley’s comments came on a day when the finance ministry announced that under proposed laws, there would not be any tax on jewellery legally inherited, acquired from disclosed sources, reasonable household savings or exempted income.

The ministry also said that there would not be any seizure of gold jewellery to the extent of 500 grams per married woman, 250 grams per unmarried woman and 100 grams per male member of the family.

The government move that has had knock-on effects for a mostly cash-based economy has also been followed by a spree of changing regulations for deposit, withdrawal and usage of currency, causing more chaos and confusion.

The ministry said on Thursday that the old Rs 500 notes would be accepted at petrol pumps and for airline tickets only till December. 2, it said. The earlier deadline was December 15. As announced earlier, Rs 1,000 notes cannot be used anywhere.

Opposition parties led by the Congress have stalled Parliament amid criticism over the slow pace of introducing the new notes, with banks running out of cash and ATMs having to be recalibrated to cope with the new bills.

Parliament’s Public Accounts Committee will call RBI Governor Urjit Patel and top finance ministry officials next month to review the economic situation.