Finance Minister Arun Jaitley said on Friday that the cash crunch that followed the scrapping of Rs. 500 and Rs. 1,000 notes would ease by December 30 with the release of new Rs. 500 and Rs. 2,000 notes.
Mr. Jaitley, however, said the amount of new bank notes being released would not be the same as that circulating before November 8, when Prime Minister Narendra Modi announced the demonetisation, a move aimed at purging black money.
"Obviously, one of the advantages of this exercise is going to be that you won't have the same level of paper currency which existed," Jaitley said.
Even as he admitted the demonetisation move is bound to create some disruption, he said it will have benefits in the long run.
"When you switch over, it creates disruption. I don’t see disruption lasting too long. You may see the impact for a quarter or so. Then when you look at next 12-15 quarters, it’s certainly going to benefit,” Jaitley said. "Of course, you will have some disruption created because of the switch-over, in the long run, advantages are going to be huge as far as the relative cost of disruption is concerned.”
Jaitley also repudiated a call by the left-wing government of India's state of West Bengal to delay a planned Goods and Services Tax (GST) to avoid inflicting another economic shock in the wake of demonetisation.
He said the plan was still to launch the new tax on April 1. Time was tight because, under a constitutional amendment that enabled the GST, India's old system of indirect taxation would lapse next September.
"If on September 16, 2017, there's no GST, then there's no taxation," he said. "Our intention is to make sure it gets implemented from April 1, 2017."
He also said that demonetisation was just "one step out of the many" that the Centre has taken to fight black money.
"We have taken a lot of steps in international financial co-operation to ensure real-time sharing of information. The impact of tax evasion is that budgets end up having deficits both at the Centre and in the states," he said.
Prime Minister Narendra Modi on November 8, announced the demonetisation of higher value currency to fight black money.