On November 8, 2016, India took a decisive step of banning Rs. 500 and Rs. 1000 currency notes to fight against corruption, black money, terror funding and fledging fake currency industry. The government has taken several measures to make the transition as smooth as possible without leaving the scope for any loophole that allows black money holders to launder their illegal wealth. In India, the corrupts are well connected and influential. They consider themselves above the law and can go to any extent to establish their superiority over other fellow Indian citizens. Since they play a critical role in the formation of every government, it is almost impossible for any government to make a policy that goes against the interest of such powerful and wealthy people.
The Government of India led by Mr. Narendra Modi has pleasantly surprised its citizens by taking one of the biggest policy decisions since independent India to fight against graft. The new rule may cause temporary inconvenience to millions of people across the country. However, its positive impact may be felt for generations to come.
The fight against corruption is a continuous process and will continue till humans exist on earth. No single rule or policy can eliminate the corruption completely. What matters the most is whether we are moving in the right direction or not. Keeping aside our political inclinations, let us analyze the current policy to see its long term ramifications and where we are heading.
Here are some facts from the recent policy decisions made by Government of India to fight corruption:
- Existing notes of Rs. 500 and Rs. 1000 will not be valid from 9 November 2016 onwards.
- RBI will shortly issue (On 10 November) new notes of Rs. 500 and Rs. 2000.
- Rs. 2000 currency will be the first in India
- The old notes can be deposited in banks and post offices accounts from November 10 to December 30, 2016, without any limit. You need to carry Aadhar and PAN cards to deposit the money. After December 30, you can deposit the old notes in some designated offices of Reserve Bank of India with reasons and declarations. While there is no limit on deposit of old notes, you can exchange old notes worth INR 4000 up to 24 November from any banks and post offices accounts.
- ATM withdrawals will be limited to INR 10,000 per day and INR 20,000 per week. The limit will be increased later.
- Until November 11, Rail, Bus, Air Ticket Counters, Petrol Stations (authorized by public sector companies) and government hospitals, milk booths, Safal, Crematoria and Burial grounds will accept old notes. Tourists can exchange old notes at Airports.
- Banks and ATMs will be closed for Public on November 9 and while some of the ATMs may not function on November 10. The cash withdrawal limit will be Rs. 2000 for 9 & 10 November.
- The cheque, card, and online payments will remain unaffected. The coins and other notes of lower denominations will continue to be legal tender
- New notes of Rs. 500 and Rs. 2000 will be available in ATMs from 11 November.
Connecting the Dots
GoI started one of the biggest financial inclusion schemes of the world – Jan Dhan Yojna – to integrate the weaker section of the society into mainstream financial and banking system. More than 250 million (25 crores) new bank accounts have been opened as on November 2, 2016, under this scheme. Almost 200 million RuPay cards have issued under the same scheme. This scheme helped a lot of poor people to get connected with the banking system of the country.
Then through a Voluntary Income Disclosure Scheme, the government gave an opportunity to people to legalize unaccounted wealth by paying a flat 45% tax. At the same time, Income Tax department has become hyperactive and tracking all large transactions. PAN card has been mandatory for transactions of more than Rs. 2 lakh. Several other measures were taken to make black money transactions difficult. The current decision taken by the government is not a diversion tactic to divert attention but a part of its carefully crafted strategy to eliminate corruption. Thus, expect some more stringent policies and tough decisions to fight graft in the future. The next steps by the government will not close the loopholes but also strengthen the enforcement procedures to track and prosecute regular offenders.
There are some genuine concerns over the introduction of Rs. 2000 notes. Since the new notes have improved security features, it will be far easier to track them as compared to old currencies. Some people may truly face temporary hardship for few days. I suggest them that a few minutes of painful exercise in the morning can transform the way your body and mind works for the entire day and even for whole life. This is one of the best decision taken by any government since independence. And people should accept small inconveniences with grace. At the time of writing this blog, the real estate shares have tumbled by 20%. It clearly indicates the future impact of this decision on prices of properties. The price correction in real estate should be big news for lakhs of home buyers who wish to buy a home but can’t do so as the current rates are ridiculously high.
The new rule will also impact political parties including the ruling BJP which will find it difficult to fund their extravagant campaigns. The best part of the announcement lies in the way government has handled it. At the time when the bedroom discussions become the breaking news, the entire useless Indian media and political establishment have been shown their real “Aukaat” by the Modi government. The government and RBI must have made extensive preparation for printing and introducing new notes by November 11. However, none of the media houses or political leaders were able to get an iota of insider information. I call this the best example of “minimum government and maximum governance.” It also shows the honest intentions of the current establishment at the centre to eliminate the menace of corruption.
I will keep adding new facts and figures on this blog. Meanwhile, I would like to know your critical opinion on this issue. If you find my analysis biased or incomplete, don’t hesitate to point it through comments. If you like it, please like, comment and share it to spread the word.