The central government on Thursday backed its high value currency ban move in the Supreme Court by asserting that the "bold move" of demonetisation would eradicate black money and slush funds operating since Independence which cast a "parallel economy" hitting the poor and the middle class.
The Centre, which filed an affidavit on demonetisation, said the decision on which a total secrecy was maintained, would now help in proper implementation of the ambitious 'Jan Dhan Yojana' under which around 22 crore bank accounts for poor people have been opened as reports of unscrupulous elements using these accounts to convert their black money into white surfaced.
Further, demonetisation is seen as a check on the real estate sector where prices get pushed up artificially, reducing the availability of affordable housing for the poor and the middle class.
The Centre said it has adopted a "multi-pronged and calibrated approach" to eradicate black money and promote cashless transactions and
"The withdrawal of existing high denomination bank notes will curb funding of terrorists. It will eliminate black money which casts long shadow of the parallel economy on our real economy. The poor and middle class, who are worst sufferers due to black money, will be benefited. It will help reduce tax avoidance and bring more transactions into the formal economy," it said.
Elaborating on several measures including the "thrust" given for increasing digital payments in the economy through credit and debit cards, internet banking, mobile apps and e-wallets, the Centre said their use has seen a jump of nearly 300 per cent in the last 10 days.
In its affidavit, the Centre also gave reasons for maintaining secrecy about the move which was announced by Prime Minister Narendra Modi just after 8 PM on November 8 and came into force from the midnight.
"The gigantic dimensions and possibilities of compromising on secrecy were taken into consideration. If elaborate prior arrangement for distribution of new currency notes were made prior to the announcement of the scheme, the very objective of the scheme would have been defeated. Further, the scheme impacts several sectors in the short-term but promises large benefits in the economy in the medium-term," the affidavit said.
The affidavit, filed a day before a crucial hearing, contended that "no serious attempt at this scale has been attempted in the past" and in the "two attempts made in 1946 and 1978, the scale of operation was not as expansive due to the sheer size of the cash component in the economy".
Justifying the decision to do away with Rs 1,000 and Rs 500 notes which constituted 80 to 85 per cent of the cash flow, the affidavit, settled by Attorney General Mukul Rohatgi, said, "The withdrawal of existing high denomination banknotes will curb funding of terrorists with the proceeds of FICN (fake Indian currency notes) and use of existing FICN network for subversive activities."