A huge sensation overtook India like a storm overnight.
In a major step to check black money, Prime Minister Narendra Modi on Tuesday announced demonetization of Rs 500 and 1000 currency notes with effect from midnight, making these notes invalid in a major assault on black money, fake currency and corruption.
Prime minister Modi said the notes of Rs 500 and Rs 1000 “will not be legal tender from midnight tonight” and these will be “just worthless piece of paper.” However, he said that all notes in lower denomination of Rs 100, Rs 50, Rs 20, Rs 10, Rs 5, Rs 2 and Re 1 and all coins will continue to be valid. He also announced that new notes of Rs 2000 and Rs 500 will be introduced. Prime Minister Modi said people holding notes of Rs 500 and Rs 1000 can deposit the same in their bank and post office accounts from November 10 till December 30.
Why ban black money ?
In two words: black money. Unaccounted money, often used in any form of corruption or illicit deals, usually takes the form of high-value notes, which in this case are the Rs 500 and Rs 1000 bills. In his speech, Modi specifically pointed out that these large-value notes were being used to finance corruption and fund terrorism.
But how are people affected by this ?
This move deeply impacts the working sections of society: drivers, maids, cooks, electricians, plumbers. Anybody who provides services in the informal sector and depends on monthly or bi-monthly cash payments.
Why? One obvious example: if you had planned on paying your maid or cook tomorrow and you aren’t able to beat the ATM queues or have enough smaller-value notes lying around the house, they will have to wait to be paid until you can get your hands on some cash. If ATMs are not replenished quickly and often over the next two weeks this could be a very serious problem. The severity of this impact will depend on how easily and smoothly India’s banking system and the government executes the transition.
Stepping back, however, anybody in rural India who doesn’t have access to a bank account (roughly 200-300 million people at last estimate, although the number is likely higher) and depends on high-value cash transactions will be crippled until new notes come through. One argument is that with the Jan Dhan scheme and the UPI/digital payment stack, rural India shouldn’t have too much of a problem. However, it will be a long time before rural India moves to completely cashless transactions.
In the short-term, people in rural India who have a significant amount of Rs 500 and Rs 1000 notes, but no official form of identification will have a tough time in exchanging their notes.
Well looking on the bright side :
1. Funding of terrorist would be banned – At last, this is going to be a huge step against Combating Home grown terrorism as well as terrorism from across the border. Pakistan prints Indian currency and circulates them via Nepal and Dubai in order to fuel his terrorism campaign. This will end from midnight. Some Big terrorists would see a huge decline in their net worth.
2. No more tax evasion – No more Hawala and other money laundering scams.
3. No dead money – It’s better to burn that buried cash or deposit it with Bank as you don’t have a third choice.
4. Increase in usage of plastic currency – Credit and Debit card transaction would see sharp increase in usage. People would have to resort to plastic currency as it’ll a while for the new currency notes to be available easily.
5. Demand for chartered Accountants would touch the sky – Firms and institutions would hunt for smart CAs. You already know what I mean.
6 . After an year or so, the economy will be back on track with robust and sound future. Economy could have grown without this move but that would have been a hollow one that could have been shattered by s slight blow.
7. Long term GDP growth rate will be much higher than current rate.
We all should appreciate our government for this bold step. This is India entering big leagues. You should embrace it.