PM Had Broad Shoulders, Chose Harder Option: Arun Jaitley on Notes Ban

New Delhi: Finance Minister Arun Jaitley has said that the "transitory pain" of demonetisation is regrettable but the move will lead to a cleaner economy and better GDP growth in the long run as banks will have more funds to lend.

The pain, he said, had been factored in when the decision was taken to ban 500 and 1000 rupee notes to eliminate corruption and black money.

Prime Monister Narendra Modi, the minister said, could have taken the easy way out like many others but he chose the hard option. "Prime Minister had the broad shoulder to face the consequence of this and a decision of this kind carries the pain in transition which is regrettable but which was also factored in... The PM had an option of doing which many other had done -- look the other way. That was an easy option, a very comfortable option. He chose the harder option. And I'm sure this harder option will certainly leave footprints behind as far as future is concerned," Mr Jaitley said while addressing domestic and global investors in the petrochemical industry at a conference on Wednesday.

India, he said, was in the "cusp of history," and would see major changes by becoming a "society in the long term with a certainly better GDP, a cleaner ethics, a cleaner economy."

Admitting that there is a shortage of cash in the system after PM Modi announced the note ban exactly a month ago on November 8, Mr Jaitley said the Reserve Bank of India releases certain amounts of currency and the shortage was also being made up by people doing more digital transactions. "In these 2-3 months, India will move digital. We will achieve far more than what we have achieved in the past few decades. What we will end up achieving is to lay down this new normal," he said.

Mr Jaitley said the demonetisation move would fetch more money into the banking system and the capacity of banks to support the economy would go up. Low-cost funds would be available with banks.

"More transactions coming into the banking system means more transactions coming into the taxation system," the minister added.

Since November 10, Rs 11.85 lakh crore in form of old 500 and 1,000 rupee notes have returned into the banking system, the RBI has said.

It was estimated that the old 500 and 1000 rupee notes constituted 86 per cent or Rs 15.44 lakh crore in circulation.