: Read the following passage carefully and answer the questions that follow.
The Reserve Bank of India’s annual report for 2017-18 reveals that 99.3% of currency notes that were demonetized at midnight on November 8, 2016 have returned to the banking system. This is only marginally higher than its provisional estimate last year that over 99% — or 15.28 lakh crore worth of the old 500 and 1,000 notes — out of the 15.44 lakh crore that were in circulation at the time had been deposited by June 30, 2017. This makes a couple of things crystal clear. First, the hope that a large chunk of unaccounted money would not return to the system — arguably, the principal reason for the exercise — was almost wholly belied. As a result, the plan to transfer the arising surplus from the RBI to the Centre, which was not formally declared but strongly rumored, was a non-starter. Second, given the sheer logistical difficulty in penalizing all those who converted unaccounted money into legal tender, demonetization worked as an unintended amnesty scheme. Despite the significant cost to the economy, demonetization, to the disappointment of the Prime Minister’s critics, had no political fallout. Narendra Modi succeeded in portraying the move as one that would knock out the corrupt rich — a harsh but necessary shock therapy. This was perhaps why the massive disruption caused by the overnight removal of 86% of the currency in value terms did not cause agitations.
Nevertheless, the RBI report, which points to a spurt in counterfeiting of the new 500 and 2,000 notes, raises the old question all over again. Was it worth the slowdown in growth, the damage to informal sector supply chains, and job losses in sectors such as construction that were the bulwark of employment creation for the unskilled? True, there have been some benefits. For instance, the number of income tax returns filed has surged a little over the trend growth rate. But surely this could have been achieved by other policy measures. Cashless modes of payment have become more common, but financial savings in the form of currency have also risen, suggesting that people still value cash. Not all policy choices work out and accepting mistakes or planning flaws helps strengthen governance processes. For example, learning from the UPA’s mistakes, a cleaner auction process for natural resources has been worked out.
The government must not disown its biggest reform attempt or try to sidestep parliamentary scrutiny of the outcomes of demonetization. Instead, it could focus on fixing the problems that people still face — transactions with 2,000 notes in the absence of 1,000 notes are difficult as it is a departure from the currency denomination principle (every note should be twice or two and a half times its preceding denomination). Even as these issues are sorted out, the larger lesson must be heeded: sudden shocks to the economy don’t always yield intended policy objectives. The introduction of the goods and services tax (GST) last year has only spurred India to move even further away from the discretion-based approach. The introduction of GST has only underlined the audit trails in economic transactions, making it that much more difficult to conceal money.
Finance minister Arun Jaitley had disclosed last week, in a social media post, that the number of income tax returns almost doubled from 38 million in 2013-14 to 68.6 million in fiscal 2017-18.While it was never the Plan A of the demonetization strategy, the growth in digital money has got a big leg-up. With e-commerce poised to accelerate, there is every reason to believe that this will only gather further momentum. Exactly why foreign investors, including Warren Buffet, are lining up for a slice of the action. Finally, the biggest let-down has been that politics of confrontation has denied the country a fair debate on demonetization. Disruption in Parliament ensured that we never really heard from the finance minister on the logic of the move, the extent of black money and so on.
Q1.How did the demonetization work as an undevised official pardon for some people?
A. As cashless modes of payment proved beneficial for people denying the fact that people value money more in the form of cash.
B. As it acted in corrupting the rich people.
C. As on account of demonetization people could convert unaccounted money into legal tender.
D. As some people got scared of the wrath of the government and voluntarily admitted their undisclosed incomes.
E. All of these.
Refer to paragraph 1 where it is given that the sheer logistical difficulty in penalizing all those who converted unaccounted money into legal tender, demonetization worked as an unintended amnesty scheme.
Q2. Despite many critics why demonetization had no political fallout?
A. Because of the trend in growth rate.
B. Because of the trend in growth rate.
C. Because of the backup and policy enhancements provided by top financial and banking institutions
D. As it was very well portrayed that it would wipe out the corrupt rich.
E. As the introduction of GST along with it proved to be beneficial.
The answer is given in the paragraph 1 itself where it is mentioned that despite of many critics, demonetization had no political fallout. This is because Narendra Modi succeeded in portraying the move as one that would knock out the corrupt rich.
Q3.Among the following options which is the benefit of demonetization that has been proved? (Answer only in the context of the passage.)
A. Job increment in sectors as construction
B. The number of income tax returns filed has surged a little over the trend growth rate.
C. Lower formalization of economic activities.
D. Providing counterfeit cash to fund illegal activity and terrorism.
E. All of these.
Refer to paragraph 2 where it is given that demonetization has resulted in various degrading factors such as slowdown in growth, the damage to informal sector supply chains, and job losses in sectors but apart from that it has also proved to be beneficial in one of the sectors and the one that is mentioned in the paragraph is “the number of income tax returns filed has surged a little over the trend growth rate.”
Q4.Which one of the statements is definitely false according to the given passage?
A. Cashless payments became more prevalent in the phase of demonetization.
B. The number of income tax returns tripled from 2013-14 to 2017-18
C. Despite the significant cost to the economy, demonetization had no political fallout.
D. A large chunk of unaccounted money returned to the system-the principal reason of
E. A large chunk of unaccounted money returned to the system-the principal reason of the exercise of demonetization.
The number of income tax returns did not triple from 2013-14 to 2017-18 instead they doubled in this period. This can be inferred from last paragraph where the text is quoted as, “Finance minister Arun Jaitley had disclosed last week, in a social media post, that the number of income tax returns almost doubled from 38 million in 2013-14 to 68.6 million in fiscal 2017-18.”
Q5.In which way has the introduction of GST yielded intended policy objective?
A. As financial institution were expected to see an increase in the number of commercial loan borrowers.
B. The insurance premiums and investments became costlier due to a higher GST rate.
C. By underlining audit trails in economic transactions making it more difficult to conceal money.
D. Market for real estate estimated to decrease after GST.
E. None of these.
The appropriate answer is option (c).Refer to paragraph 3 where the text is quoted as “ The introduction of GST has only underlined the audit trails in economic transactions, making it that much more difficult to conceal money.”