India may go cashless in a year, Rs 500, Rs 2k notes to be redundant: experts

Mumbai: Arthakranti Pratishthan, a think-tank, which appears to be the brain behind the Modi government’s demonetisation scheme is of the opinion that within six months to one year India will be all set to go “cashless” at which point Rs 2,000 and Rs 500 notes could also be withdrawn.

Speaking to the Asian Age, Amod Phalke, a senior member of the think-tank said that the demonetisation move has paved the way for introduction of a banking transaction tax (BTT). The BTT, according to the think-tank will lead to the abolition of all taxes in India — Income tax, VAT, excise duty and even the proposed GST.

In its latest issue, RSS mouthpiece Organiser credited the think-tank for being instrumental in the demonetisation initiative by the government on November 8.

The Organiser interview quoted another senior member of the think-tank Anil Bokil, who, when asked if he was in touch with the Prime Minister on the demonetisation issue said, “The Prime Minister is an institution. He is not a person. He is so busy that he has no time to even meet his family members. Therefore, the PM and we were engaged in discussions at the institutional level and not at family level. The way the secrecy was maintained was also commendable.”

Explaining the idea behind the BTT, Phalke said that people would have to pay 1-2 per cent tax on the amount credited or deposited in their bank accounts. This deducted amount will be distributed among Central, state and local bodies. Since nearly all transactions will be cashless, Arthakranti Pratishthan believes that BTT will raise '21 lakh crore taxes, which is equivalent to all the taxes raised by the Centre and states together. 

Phalke pointed out that as the Indian economy is highly currency dependent, Modi could not at once withdraw all high-value currency.

“But Modi in his speech has clearly mentioned that Rs 2,000 notes will be regulated. Once people start looking at cashless ways to pay, Rs 2,000 currency notes also could be easily withdrawn,” he said, adding that Rs 50 and Rs 100 notes would continue to be used till poor people and those living in rural economies moved to a cashless economy.

“If you will see any other economy like the US, people don’t keep such large amounts of money with them. But in India, due to high denomination notes people have been out of the banking system,” said Phalke. He also said that they had been in touch with Modi since 2013 when he was the chief minister of Gujarat.

He maintained that the government in its new plan didn’t want people to be penalised even for depositing '100 crore in banks. “The earlier taxation system was defective. So these people should not be penalised for depositing huge sums of money. The government may take 10 per cent as tax and pay back the rest in 15 years as bonds or something similar,” he said.

Phalke said that it was only a matter of time for their other related proposals to be implemented. “It will be implemented either in 2017-2018 or 2019. People have realised the power of our plan,” he said.