By Vaibhav Parakh
While everyone waited with bated breath, with the ensuing elections in the United States holding the key to understanding the ever turning geo-political ground; on the other side of the world in India, demonetisation of Rs 500 and 1000 currency notes marked an epoch – a decisive decision that stands to counteract the shadow-economy consuming up the real economy of India.
An unprecedented move marking the coming of age of the Indian Government, this act against the accumulation of black money has already been dubbed by the likes of political pundits as the “Surgical Strike on Black Money”. After the midnight of 8th November, the Rs 500 and 1000 currency notes no longer stand as a legal tender. To many, it sounds quite similar to 1978 when the Indian Government had demonetised Rs 1000, Rs 5000 and Rs 10000 notes. Though this announcement seems to be a bolt from the blue, it is aiming to strengthen the moot policy of Jan DhanYojna – enabling everyone to afford a bank account. This would eventually result in increasing the usage of plastic currency and accountable bank instruments to facilitate day-to-day transactions.
Another intent of this policy is to build up on the Income Declaration Scheme – the general amnesty for hoarders of currency who were let off with a lenient scheme of declaring undisclosed assets by 30th of September. Such individuals were able to walk free by paying 45% as a tax on the same, but those who have put on an ignorant face until now find themselves at the deep end of the pool contemplating the fate of their unaccountable wealth.
So what will this bold step be able to achieve?
- Arundhati Bhattacharya – Chairman of State Bank of India – has asserted that banks are not open to public for withdrawal of notes from counters and ATMs on 9th November. In some places, ATMs will also remain closed on 10th November.
- No limit exists for the deposit of Rs 500, Rs 1000 in banks and post office accounts from 10th November till 30th December for exchange, as long as it is legal. Post offices, bank accounts are to open additional counters and extend working hours to accommodate this urgent need.
- From November 11th, the withdrawals from ATMs are restricted at Rs 2,000 per card per day and in the coming days the limits shall be increased.
- The existing denomination of Rs 500 and Rs 1000 are a legal tender from 9th November till 11th November in all government hospitals and government-run medical dispensaries, as long as a doctor’s prescription is provided.
- Old notes are to be accepted for buying train and airline tickets.
- For next 72 hours, petrol pumps run by public sector companies, milk booths and crematoriums will accept old notes.
- At international airports, facility for exchange of old notes to foreign currency has been set up but up to a limit of Rs 5,000.
- Shaktikanta Das – Secretary of the Department of Economic Affairs – asserted that the new Rs 500 notes will be called the Mahatma Gandhi series of Bank notes carrying an image of Delhi’s Red Fort and Rs 2,000 notes will carry the image of Mangalayan celebrating India’s successful Mars mission.
- From 11th November, the new Rs 500 notes will be in circulation.
Where does the common man stand?
Soon enough, people started giving their two cents on their Twitter handles.
As of March 2016, total of Rs 16,41,500 lakh crore worth of currency notes are in circulation in India, with Rs 500 and Rs 1000 accounting for 86% of the total value of the notes.
The ‘Bold Step’ does have a political angle. It has not only levelled the economy field but by targeting high-value currency, the government has bled political parties dry of black money to be employed in the forthcoming elections. This comes at a time when the BJP is vying to dominate the competition, favouring directly the ruling party while leaving the opposition party to find chinks in the armour. Also the hawala transactions – the much-favoured paper-route – will be squeezed in the short term, sitting on a heap of paper currency of no value, though the long-term effects are yet to be noted.
This sudden announcement has given a much-needed boost to e-wallets and electronic channels of transaction, pushing for cashless transaction. The onus will be on the existing banking infrastructure to handle the surge in the employment for plastic currency. The prime reason won’t be justified without targeting terrorism which always has been funded with black money. This hurts their interests in the short run but with other alternatives to funding such as bit coins, the extent of the impact is yet to be documented.
The gems and jewellery sector in India would perhaps be the most significantly affected as a majority of whole sale market deals are in cash without being supported by receipts or purchase orders. It will take time for the Stock Markets to settle, with so much uncertainty accompanied with the news of demonetisation and the ensuing US elections.
Unconfirmed reports on the usage of Nano-GPS chips in Rs 2000 notes are being floated around directing at the usage of Nano-GPS chips which will enable the government to easily track these notes, hence curtailing black money transactions. These reports cannot be deemed legitimate as of yet, world’s smallest fully integrated GPS has been developed by OriginGPS Nano Spider but the feasibility of the idea is still unconvincing. The device which comes at a bare minimum cost of Rs 50, will inflate the cost of printing of Rs 2000 currency notes if they were to be implanted.
Prime Minister Narendra Modi had warned that he must not be blamed for a tough stance on Black money after 30th of September. He finally has made good on that warning.
Data mentioned in the article has been cited from the Press Release document released by the Ministry of Finance Department of Economic Affairs, Government of India.
Featured Image Credits: Deccan Herald