In yet another clarification on the government's demonetisation drive aimed to curb black money, Finance Minister Arun Jaitley said on Thursday that the move towards a cashless economy is actually a "less cash economy" as no economy can be fully cashless.
Making his opening remarks at the fifth meeting of the Parliamentary Consultative
Committee, he said digital transactions are a parallel mechanism and not a substitute for cash transactions as no economy can be fully cashless, a Finance Ministry release in New Delhi said.
He emphasised that a "cashless economy is actually a less cash economy", it said.
"He said that less cash can be gradually substituted to the extent possible through digital payments and transactions," the statement added.
According to the ministry, Jaitley told the committee members that the "government was trying its best to minimise the common man's pain".
Admitting that there are visible and hidden costs in reducing cash volume in the economy, the government last week announced a series of eleven measures designed to increase the pace of digital payments.
Among the measures, payment by card for petrol and diesel will enjoy a discount of 0.75 per cent.
Customers will get a higher discount on digital payment as all central undertakings will ensure that the transaction fee and merchant discount rate (MDR) charges are waived on such payments, Jaitley said.
Suburban railway monthly and season tickets bought through digital payment will get a 0.5 per cent discount, effective from January 1, 2017, beginning with the Mumbai suburban railway network.
Jaitley also announced that online payment for public sector insurance companies (life insurance and general insurance) will get 10 per cent discount for general insurance and 8 per cent discount for life insurance for new policies sold.
Meanwhile, asserting that the Indian economy is "very stable" at the macro level, Chief Economic Advisor Arvind Subramanian on Thursday said managing demonetisation was a short-term challenge for the next few weeks and months.
"One of the challenges for the Indian economy in the short-term is to manage the demonetisation fall-out. How do we manage demonetisation in the next few weeks and months," Subramanian said at an Associated Chambers of Commerce and Industry of India (Assocham) interactive session in New Delhi.
"However, this would be a short-term phenomenon," he added.
On the demand for lower Goods and Services Tax (GST) rates, Subramanian said lower and simpler taxes are always preferable.
He also called for inclusion of real estate and electricity into the GST value chain.
Referring to some important global developments like the hike in the US Federal Reserve rates, he said the Indian economy was well-cushioned to cope with these events.
"This was anticipated and expected. My own view is that the Indian economy is very well-cushioned to absorb the impact of this. The RBI policy also took account of this in a very sensible way. There may be some short-term things. This is not something we need to worry about," he added.
On the outflows from the emerging markets, he said that after the US elections, there were big fund flows from the emerging markets.
"But given that India is in bright spot, the impact on us would be much less," Subramanian said.