Whenever PM Narendra Modi prepares to address the nation there is generally a lot of publicity before it, there are online poster wars and the mainstream media tickers keep flashing the date and time incessantly. But this time, the announcement of the demonetization of Rs.500 & Rs.1000 notes was almost like the surgical strike that India conducted on 29.09.2016. Only a handful of ministers knew about it and media couldn’t sniff about it. Modi came and announced what probably is the biggest global crackdown on Black money.
Unprecedented, that’s the word that came to mind when our Hon. PM Narendra Modi, announced the surgical strike on black money. This announcement turned out to be a pleasant shock for the honest majority of India. This is certainly a dark day for the ones with unaccounted money stashed all around. PM Modi raised the issue of fake currency and called it a menace. He said fake currency fuels terrorism and corruption, which is holding back the Indian economy. He mentioned that on one hand fake currency and terrorism is destroying us and on the other hand corruption and black money are creating hurdles for the nation’s progress.
PM Modi said that the process of cash circulation is directly related to corruption and black money in our country and then began the big announcements. Here’s what he mentioned:
- Currency notes of Rs.500 and Rs.1000 will not be available any more.
- The citizens have a window of 50 days to deposit the currency notes of Rs.500 and Rs.1000 in the nearest banks and post offices.
- The Rs.500 and Rs.1000 can be exchanged in banks and post offices before 30th December, 2016.
- On November 9 and in some places on November 10, the ATMs were closed. On November 9, the banks were shut for the customers/public work.
- Those unable to submit notes till December 30th, will b e given a chance to submit notes by giving declaration to RBI.
- There was a window of 72 hours, where Rs.500 and Rs.1000 notes would be acceptable at the hospitals, airports, bus stops, railway counters, petrol pumps and burial grounds.
- New Rs.500 notes will be brought into circulation and a new Rs.2000 note will be issued.
Though this announcement has been made to stop the corruption and black money, the black money hoarders have already found ways to bypass Modi’s currency ban. The black money hoarders are using the method of currency exchange i.e. buying broken and bad currency for exchange of a fee. There is a thriving parallel currency exchange system that operates in almost all big cities of India. Now hoarders are using this system to get their hands on “broken” or “bad” currency in exchange for banned notes. Obviously the value they are getting for the banned currency is less, but they have their own ways to get their banned currency converted into new tenderable money. They are distributing money to employees, workers or family members. As per RBI regulations, an individual can deposit 2 lakhs of money into the bank but withdrawal would be capped at Rs.10000 per day and Rs.20000 per week. It is said that the limit will be increased in the next few days. By distributing the money to employees, workers or family members, hoarders can actually change a lot of black money into white.
This so called surgical strike on black money created a pandemonium situation among the honest majority of India. The common people are suffering for this announcement of demonetizing the currency notes Rs.500 and Rs.1000. For a minority of people holding black money the larger section of the nation has to suffer. People are having difficulties to spend their daily livings, as their isn’t enough lower denomination notes in the market as required. There have been long queues in the banks, post offices and ATM counters, since the declaration of the demonetization of higher denomination notes. The ATM counters doesn’t have enough money to fulfill the necessity in the market. The supply of new notes doesn’t match the requirement of the market. This kind of situation is creating more chaos.
Earlier similar act was undertaken by the then PM Morarji Desai in 1978, wherein the notes of Rs.500, Rs.1000 and Rs.10000 stopped being legal tenders. Though Rs.500 and Rs.1000 notes were later brought into market again. Current act by PM Modi is being compared with that. In fact, arguments are being made that in spite of that, black money was created later on, so things will not change much. However, current process is different where the entire currency is being replaced with new tender. In fact, with new printing format, entire fake money in system will be rendered valueless. So the chances of using that money are very less.
Let’s see what changes this demonetization of higher denomination notes makes to the Indian economy.