Going by the promise of 2014 elections – to bring back the black money into the financial system of India, Prime Minister Narendra Modi on 8th November, 2016 while addressing the nation on television, said that the use of 500 and 1000 rupee notes will be illegal from midnight. This bold step to curb corruption and bring the undeclared money back to the Indian market was welcomed by the President, Pranab Mukherjee. He also asked the people not to worry about their savings.
As a result, banks and ATMs were shut on 9th November 2016 and in some places ATMs were closed on the next day too, in accordance with the PM’s decision. There was a heavy rush of people to withdraw money from ATMs to avoid being caught without cash for a few days. A long queue can be seen even now, in front of the banks and ATMs for the same.
The finance ministry told that the new 500 and 2000 rupee notes will be circulated in the market shortly. As per RBI’s database, Rs. 7,88,299 crore rupees is circulated in the market. Of this Rs 500 and Rs. 1000 notes constituted almost 76% of the currency in circulation. This measure would mean that, almost Rs 6,32,600 crore in circulation in the form of Rs 1,000 notes would be illegal tender. To replace them, Rs 2,000 notes would be introduced, which according to the government would be limited in circulation.
RBI data shows that in 2015-16, almost 6.5 lakh counterfeit notes were detected in commercial banks of which almost 4 lakh were in the Rs 500 and Rs 1,000 category. It is in this context that the government wants to re-monetise the Rs 500 note while de-monetizing the Rs 1,000 note. But the number of Rs 100 counterfeit currency were also close to 2 lakh this year.
This move did have its pros and cons. This move will prevent investing one’s hoarded money in real estate and jewellery. Banning higher denomination notes and constant monitoring of transactions (which will now take place) is a boon to honest taxpayers.
On the contrary, the common man is likely to get affected. Impact will be on individuals/businesses who accept payment only in the mode of cash. The economy and the common man is going to destabilise for a while. The small vendors, grocery shops and daily consumer goods purchase is going to be hard. Also reduction in withdrawal limit from the ATM will hinder daily expenditure and will push people to visit them regularly. The ATMs will run out of cash more often.
The biggest advantage to the country will be that the funding for terror activities will take a blow. People will invest more in gold due to loss in faith in currency which will increase investment in government’s gold monetisation scheme. More use of plastic money. It’ll increase opportunities for the poor. Increase in credit will help the government to increase the job opportunities for the people. Reach of estate, education and health care will expand.
Bhavya Jain (2nd year,CSE)