Prime Minister of India's address to the nation on 8th Nov'16 at 20:00 hrs came as a rude shock to many when in his address he made a revelation to the entire nation that the existing highest currency denominations in India which is INR 500 and INR 1000 would no longer be a legal tender starting midnight. What that implied was that these notes could no longer be used for any financial transaction and would have to be exchanged from the banks or post offices with the new currency notes of equal value. In four hours these major currency bills would become valueless. This was huge and nobody had a clue. While he did clarify his action as another step in the fight against black money menace that had been impacting the country's economy adversely.
BackgroundIf we step back a little. This huge announcement only came a month after the amnesty scheme called IDS 2016 (Income Declaration Scheme) ended on 30th Sep'16. This was another major step undertaken by the current government to curb the black money menace and make people declare their undisclosed assets. Under the scheme the income tax department had politely asked the citizens especially the non tax-payers and defaulters to declare their undisclosed wealth and pay a 45% tax guaranteeing no scrutiny or legal proceedings against the declarant. The scheme fetched the tax department 65,250 Crores (almost $10 Billion) worth of undeclared money. Though this was not that great a success considering the black money and undeclared income and the fact that only about 1% Indians pay income tax in this huge country of 1.25 billion but still a valiant effort.
Impact of Fake Currency
|New INR 500 Note|
|New INR 2000 Note|
From 10th Nov -30th Dec'16 all the existing 500 and 1000 Rupee notes can be exchanged at the banks and post offices all across the country. The chart below depicts in details how the exchange or deposits would work while the transition is completed. Additionally provisions have been made to ensure the inconvenience to common public is minimised and essential services like medicines, healthcare, food, travel services etc provided through public systems still continue to accept the old currency for next 72 hours post implementation. All banks including private and public sector to also remain open on the weekend including sunday.
The Challenge Ahead
Its also fantastic to see that people of the country have taken this initiative in sporting spirit and despite the inconvenience, are overwhelmingly supporting it. Social media was flooded with praise for the move, while some went beyond amidst all the hullabaloo and circulated news about the new note being loaded with some NGC (Nano Gps Technology) allowing tracing of notes via satellite. The hoax was however soon called off. So much for the fun. Irrespectively, this is a mighty blow to the black money hoarders, hawala operatives as well as the political and business fraternity indulging in corruption as they have all been suddenly caught on the wrong foot. Its like a crisis without a warning for them. With upcoming elections in some of the major Indian states this is certainly a welcome move to avoid illegal fundings of political parties. The money could have otherwise been used in influencing voters. In view of all this one can easily ascertain that among the dissenting crowd are mostly the political class especially the opposition parties. There have already been PILs filed in court against this game changing decision. We are also witnessing few odd examples of people burning counterfeit currencies.
Also do check out more on demonitization on my blog http://hubpages.com/politics/Demonetization-And-The-Fight-Against-Fake-Currency-Black-Money