PM Modi Defends Notes Ban, Announces Incentives

New Delhi: Prime Minister Narendra Modi announced a slew of incentives to the poor, farmers, women and small businesses on Saturday in a special New Year's address, and defended his shock decision to abolish high denomination bank notes.

The withdrawal of Rs 500 and Rs 1,000 bills on November 8 caused widespread disruption and anger in a country where cash is dominant, and the televised speech was seen as an opportunity to offer financial relief to people suffering most.

PM Modi had pledged that conditions would improve by the end of the year, but Indians have had to queue outside banks for hours to deposit old money or withdraw limited amounts of new notes.

Analysts have forecast that economic growth will be hit this quarter as a result.

But PM Modi believes long term gains will outweigh the short term pain; his radical decision was aimed at banishing the shadow economy, boosting taxes, beating corruption and moving towards a cashless society.

"In this fight against corruption and black money, it is clear that you would like to walk shoulder to shoulder with us (the government)," PM Modi said, speaking in Hindi. "For us in government, this is a blessing."

The Prime Minister, who swept to power in 2014 on the back of promises to root out graft, said the authorities would continue to stamp it out.

"Serious offences by bank and government officials have come to light. No one will be spared," he said.

The speech came weeks before the government is expected to announce its annual Budget, probably some time in February.

Among measures announced on Saturday, PM Modi offered a 4 per cent discount on interest rates for home loans for up to Rs 900,000 taken out in 2017 by middle class Indians.

He also said the government would increase credit guarantees for small businesses and provided additional incentives for digital transactions.

Some of the incentives appeared to be geared towards the huge rural population, a key constituency in Uttar Pradesh, including reducing interest on certain loans for agriculture.

PM Modi did not say how the government would pay for the new measures, although his administration has sought to keep budget deficits under control.