By Apoorv Pathak:
The Prime Minister executed a bold move on the night of November 8 with his announcement that ₹500 and ₹1000 notes will be discontinued and circulation will stop immediately. While various economists have for long suggested such a step, no political executive in the last three decades had the courage to implement such a drastic measure.
What are the intricacies related to this announcement? And how it can prove to be a game-changing decision?
1. ₹500 and ₹1000 notes will cease to be legal tender beginning November 9.
This means that apart from the exception the Government has provided; there will be no compulsion on anybody to accept these notes, thus making them worthless.
2. Hospitals, petrol pumps, railway reservation counters, airports, crematoriums and other key services will continue to accept these notes for 72 hours, until November 11.
3. Rs 500 and Rs 1000 notes can be deposited at post offices and banks without any charge till December 30, i.e. you have 50 days (From Nov 10 to Dec 30), to deposit notes of ₹500 & ₹1000 in any bank or post office.
4. On November 9, all banks were closed for public work.
5. Notes of ₹ 500 and ₹2000 will be circulated soon. The RBI has decided to limit the notes with higher value.
Since most black money holders (big and small) have the cash in large denominations, the PM’s success in keeping the move a surprise will deal a massive blow to the corrupt. So will restricting the amount an individual can exchange, and the requirement of an identity proof for exchanging these notes.
A significant section of their black wealth will be rendered worthless. The manner in which the Prime Minister was able to keep the decision a surprise needs special praise. Indian Governments in the past have been infamous for not been able to keep secrets.
In this decision where a large number of stakeholders – the banks, the RBI, different ministries, etc. must have been taken into confidence yet secrecy was maintained. Modi pulled off what can be called impossible.
The efficacy of this move lies in it being a surprise. If information about this had leaked, the whole purpose of executing this would have been defeated as those are in possession of black money would have swiftly found ways to turn notes of large denominations into smaller ones. But only because this was all a secret, the possibility I mentioned before has been significantly precluded as the announcement was made only a few hours before coming into effect.
The timing again must be lauded. With the festive season that just went by and the election season that’s coming, black money in cash would be at its highest circulation. Thus, this decision will have a greater impact now than at any other time.
As black money is said to finance terror outfits, it is the result of corruption; such money has also evaded tax. This move will help curb terror financing, reduce corruption and bring more unaccounted wealth within the ambit of taxation.
The surprise announcement is also a big victory in our struggle against counterfeit money. Firstly, most of the present counterfeit money will be rendered worthless. Secondly, since the new notes will come with better security features and will be significantly different from the ones counterfeiters have developed mastery in duplicating, the job of counterfeiters in the future will also become that much more difficult.
The blow to counterfeit money which is also used to finance terror activity couldn’t come at a better time than now when the heightened tension with Pakistan would have lead to the larger circulation of counterfeit money.
In conclusion, this brave measure by the Prime Minister significantly strengthens India in its fight against black money, corruption, counterfeit currency and terror activities.
This move is an example of the kind of political willingness to tackle problems head on is what the Indian populace has long craved for. We have been disappointed by timid politicians afraid of experimenting and taking bold steps, and this trend must change with the bold step taken by the Prime Minister.