9 Answers
It’s a bold move by the Indian Government and can be called as the Surgical strike of the Government on Black Money (add Terrorist funding, arms smuggling and Counterfeit currency to that).
The joke on twitter sums it up nicely.
India prepared for Hillary and Trump, Modi came out of syllabus
Currently Rs 17,54,000 crore worth of notes are in circulation according to the RBI’s database on the Indian economy.Of this Rs 500 notes constituted almost 45% of the currency in circulation while 39% of the notes were of the Rs 1,000 denomination. In value terms.However in terms of volume, Rs 10 and Rs 100 notes constituted 53% of the notes in circulation.This measure would mean that from midnight, 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 currencywere also close to 2 lakh this year.
Immediate Impact: Heavy Deflation
Initially there will be heavy deflation as people who have earned money through illegal means such as smuggling, corruption would be afraid to declare the money as they might be prosecuted by Govt/Income Tax Dept on the legitimacy of their income.
This will reduce the total currency circulation in the economy - leading to deflation. Deflation increases the value of money that we have because the total money supply goes down but the commodities and things available in the market have not gone down.
Gold prices, stocks & commodities will drop.
This will also lead to Inflation (not overnight)
There will be a lot of people who have a lot of cash, legally earned, which they will deposit it in the bank.
Now the bank with more deposits can do more lending.
Credit (loans) will become easier and interest rates may come down. More loans given out increases broad money supply and creates inflation. But this will happen slowly, not over-night.
Deflation and Inflation will balance out each other in the future.
Some of the benefits of this movie are: (Pros)
- It will help the government to fight Black money, corruption, terrorism and counterfeit currency with one single decision.
- Arms smuggling, espionage and terrorist related activities will be choked due to lack of funding.
- Counterfeit currencies are being used for financing terrorism which is being run by the enemy in India. Now Govt has taken a bold move which enables them to fight counterfeit currency/terrorist funding activities.
- With the new limits on ATM withdrawals being restricted to Rs 2,000 per day, withdrawals from bank accounts limited to Rs 10,000 a day and Rs 20,000 a week, it will drive the card payments across the country (In simpler words card transactions will slowly replace the cash transactions in daily activities).
- It will be easy for the Government to track the money being exchanged as exchange can only be done by producing a valid government identity cards like PAN, Aadhaar and Election Card from 10 to 24 November with a daily limit of Rs 4000. There is no limit on the amount as long as it is legal.
- FIU of India get info about transactions from banks. During this period, banks will take extra precaution. Banks will share info with Income Tax dept. as deemed fit. (So now it is difficult to get rid of the black money which is mostly in 500 and 1000 notes)
- The traditional benami transactions have already received a big blow as the new legislation has a provision for seven-year imprisonment and fine, replacing the three-year jail term...
Benefits of Demonetisation of currency:
- Unearth Black money: Banks will maintain proper records of the people exchanging notes and forward their details to the Income Tax department. If the deposit in any account is above 2.5 lakhs, the tax department will tally the amount with the respective tax filing. Accordingly, if there is any unaccounted money, the department will impose a penalty. So, the individual will have to pay tax on the unaccounted money as well as a penalty of 200 % on the tax payable. Also, storage of black money is mostly done in high denomination notes due to its convenience. This sudden withdrawal could lead to corrupt politicians, bureaucrats, and businessmen sitting on a heap of paper currency of no value.
- Fake currency: According to the data submitted by the Union Home Ministry to Parliament in May 2016, 250 out of every 1 million notes are found to be fake. Moreover, most of the fake currency are in high denomination notes. Hence, the withdrawal of old currency (OHD) should bring counterfeiting currency notes production to a halt. Also, the new notes will have enhanced security features making it difficult to counterfeit.
- Tackle terrorism: Terrorism is mostly funded through black money and fake notes. This step will squeeze funding for anti-national and illegal activities.
- Boost to formal banking channel: It will bring a huge amount of funds in the banking channel. This could result in the increased use of plastic money and electronic payments in the day-to-day transactions. It will move India on the path of becoming a cashless economy.
- Follow-up on the Income tax declaration scheme. The Government had launched an Income Declaration Scheme (IDS) this year. Under this scheme, if you declare your undisclosed income or assets by September 30, you will have to pay a one-time effective tax rate of 45 percent on the income. Even though the Prime Minister had warned that he will take a tough stance on Black money after 30th of September, the response to this scheme was tepid.
- Deflationary impact: Most of the black money is parked in real-estate and gold. The unprecedented crackdown on illegal cash will decrease the demand for real-estate and gold, bringing down the prices.
- Political parties: It is an open secret that political parties disburse cash to voters prior to elections. A huge amount of cash is transported from one location to another for this purpose. Now, they will not be able to use cash over and above the spending limit set up by the Election Commission for campaigning purposes.
Disadvantages of Demonetisation:
- Impact on black money uncertain: There is no data on how much black money is stored in the form of cash and how much has been stored in the form of physical assets like land, flats, gold etc. Hence, the impact on black money is still uncertain. Also, tech-savvy corrupt men can use other alternatives in the future such as bitcoins.
- Political decision: People have also attributed political angle to the decision. The election season is approaching. This sudden decision has paralyzed the funding of the opposition parties while favoring the ruling party (BJP).
- Huge Costs: According to the RBI data, at the end of 2014-15, the share of Rs. 500 and Rs.1,000 notes in total currency circulation was around 84 %. So, this decision has frozen more than 84 % of the total cash in circulation in the economy. Also, there are costs involved in the printing of new money, including the administrative cost to exchange such huge amount of notes.
- The banking sector will have to improve its infrastructure and security features to deal with the sudden surge in online transactions.
Finally, it has to be noted that demonetisation of currency should be seen as only an incremental step to curb black money. Taxpayers use many sophisticated instruments (like fake companies) to convert their black money into white. The Government will have to bring back cash stashed in foreign locations as well.
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I just happen to see this Question after I did some research for my petition for exactly the same cause , This is not 100% full proof mode of curbing corruption in our country but I believe it will be very effective and will drive our economy to much of cashless economy and there will be numerous other benefits such as -
- First thing that will immediately stop is - Hoarding of black money, as people holding such black money will be forced to put that into the system or change it into other denominations,Thus huge amount of money will come back into the economy.
- Second thing that will change is Generation of black money will stop or decrease to a large extent. As one can not do large transactions in smaller notes and using Rs.50 or 100 notes in all dubious real estate and gold assets will become almost impossible.
- Third , National Security will be better as financing terror through smuggling currency and money laundering can be controlled. Like Europe recently decided to abolish Euro 500 note due to its illicit use.
- Buying votes in election will become difficult. As well all know that currency circulation reaches its peak during big elections and local politicians at many places try to buy Votes putting Democracy at stake. This will become difficult and we will see much fair elections then what we see now.
If someone finds it logical, you may please sign the petition I have started to abolish 500–1000 notes.
Thanks for A2A. This was in my draft for a long time - today sounds like a good day to post an answer to it.
Narendra Modi made a historic move of discounting 500 and 1000 rupees notes today on 8th Nov 2016. In his address to the nation - he mentioned that this move will unearth black money circulating within the country.
Modi did warn, and it was his agenda even during the elections of 2014 to stop this. His move of opening up crores of bank accounts for the villagers - who primarily relied on 500 and 1000 rupee notes - as their under the pillow vault. Now after this move, this action of discontinuing these notes makes much more sense.
I am not an expert here - but many businesses in major cities like Mumbai rely on cash to do the business - other experts will have better understanding on how this will affect local businesses and how this hinders the growth of these businesses. I agree - black money not good - but heavy transactions that happen on cash will instantly stop!? What about those!?
And to point to why RBI hadn’t done it already - they need a full-proof plan on how this might be a good idea and not affect the economy as well; I guess they have it now.
This will surely bring us close to virtual currency - more startups with brilliant ideas should come to light.
And they came up with new notes with logo of Taarak Mehta ka Ooltah/Sidha Chasmah.
More:
My thoughts.
And don’t forget to visit Global Trade Platform - where we also try to improve lives of small business owners - who suffer because other businesses who use cash for making wholesale transactions. Thank you Modiji.
Here are some things which are going to happen for sure (other than the usual happenings)
- Yours and everyone’s else 500 and 1000 denomination =0.0000 ( NIL) from Midnight 8 November or ( The moment it was announced by PM)
- RBI knows how many of these notes it has floated in the economy and now can assess the value of returned money. The amount not returned to RBI will be pictured/categorized as black money.
- Now no more cash to distribute to voters (India’s biggest corruption contributor). Imagine distributing Crores rupees carrying 100 Rs. notes. It will be nearly impossible to move around with huge load.
- You can assume that war on Black money has started in real sense. It is going to help reduce circulating black money to a large extent.
- Demonetising if followed by creating a threshold limit for cash holdings will even facilitate a further reduction in domestic black money transactions. Black money will almost become nil.
FYI
- The White paper for black money was produced by the ministry of Finance and presented to parliament in May 2012. See it here [1]
- The measure to curb 500 and 1000 denomination notes was also suggested by a Professor at IIM Bangalore. This is dated back to 23 Jun 2012. You can see it here. [2].
- Many countries have in past issued new currencies replacing existing ones. Mexico, Argentina, Turkey, Israel, and Germany to name a few. All were successful to a large extent.
Thank you :)
Footnotes
With the social media and media fueled up with the appreciation of Government’s decision of introducing a bold measure, it is important for us to understand the implications of this move.
Is it a good decision? Indeed, it is.
Will it help in curbing black money? It obviously will.
Will it completely eradicate black money from the Indian economy? Possibly not.
Let us understand the move first:
The Central government has issued a notification through the Finance ministry of India and the RBI. Modiji, in a wonderful speech, to the nation has made clear that the currency notes of 500 and 1000 will be cease to be legal tender from 00:00 of 09/11/2016.
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Everything is not as simple as it looks on the face of it. Currency notes can suddenly not cease to be legal tenders of money. Government has a responsibility towards its people and it is important for us to understand what we can and are supposed to do rather than having another hour long conversation on Modi’s dexterity as the PM.
What can be done?
A. For getting rid of your notes
- You can deposit your money to the bank account. You’ll need to go through the usual cash depositing process. However, you cannot deposit too much money straight into your account as banks will be under tight surveillance henceforth and every transaction will be done under the camera.
- You can also exchange your 500 and 1000 rupees in a bank branch with notes of a lower denomination. You’ll need to provide a valid identity proof viz., PAN, AADHAR or Voter ID card for the same. The limit for this transaction will be 4000. You’ll not be able to exchange money worth more. However, how many such transactions can be made by an individual and how frequent such transactions can be made is not clear by the official notification issued. [1]
- The notification also mentions that the 4000 limit will be reviewed in 15 days which indicates that there might be a chance that higher amount of money may be exchanged.
- You will still be able to exchange notes of 500 and 1000 in Government Hospitals, Govt. Pharmacies and Govt. Petrol Pumps until 11th of November.
- You can also deposit your money to another account provided that you have valid reasons for the same. There will be no limit on such transactions.
B. For getting cash
- Withdrawal to the extent of Rs. 10000 are allowed from Bank branches until 24th November. The withdrawn money will be in the form of notes of lower denomination. In a week, the maximum amount withdrawn from the bank account will be Rs. 20000.
- The ATM will be out of operation for the next couple of days. They will be filled with appropriate notes in two days and will resume operation from Friday, November 11th. The withdrawal limit will be Rs. 2000 until 18th November and will be raised to Rs. 4000 from 19th November.
So it’s not the panic as government has made enough provision for you to take care of money stuffed in your wallet.
Before we end this discussion and appreciate Narendra Modi to the extent of converting of our admiration into adulation, let us look at some other lesser looked aspects of the decisions.
- This is clearly a political move. A master strategist has made another attempt at turning the media into his advertiser for the upcoming UP election. With Modi’s popularity hitting a low over the previous few months and the BJP regime being criticised and sometime being equated to Nazi Germany (for the recent ban on NDTV), this move comes right on time. I wonder has the move been over-sped at the cost of causing great inconvenience to the people? If BJP wins UP election, it will get a fair number of seats in Rajya Sabha. Once NDA is in majority in Rajya Sabha as well, one can easily fathom the unilateral decisions that can be taken without a space of divergent opinions which a...
The Reserve Bank of India will issue new notes for Rs. 500 and Rs. 2000. Prime Minister Narendra Modi in his address to the nation on Tuesday said that the notes will be circulated soon, RBI has decided to limit the notes with higher value.
The Prime Minister announced that Rs. 500 and Rs. 1,000 denomination notes are being withdrawn from midnight. He said that such notes will become "mere paper".
PM Modi said this was being done to tackle the menace of black money in the country, which has sapped the economy.
Banks have also been ordered to remain shut on Wednesday, he said.
PM Modi said that for medical patients, the old notes will be accepted.
He also said that retail petrol pumps will accept such notes till November 11, after which the stations will have to keep a register of such notes for some time.
The decisions come after a cabinet meeting.
Where you can Exchange your 500 and 1000 rs notes.
- Petrol Pumps and government hospitals
- Railway, airline, government bus ticket booking counters
- Consumer co-operative stores run by state or central government
- Milk booths authorizes by state government
- Crematoriums and burial grounds
There is a guy, Bunny. Bunny is corrupt and has a lot of black money. Let's say he has about 10 crores. Now he can not store this money in banks. (Banks ask for income source, tax and other issues)
So to store his money safely Bunny creates some secret lockers behind walls of his house.
But 10 crores is massive ammont. He can't manage this money in small currency notes. So he converts his money into 1000 rupees notes and then keeps it safe in his secret lockers.
Bunny is happy. He can do corruption. Can safeguard his money. And Government had not a single clue about his activities because there are lots of bunnies out there. Government can't keep a close eye on every one of them.
So, bunny has 100,000,000 rupees. That is100,000 notes of 1000 rupees.
Now comes the TWIST in bunny's life.
Government demonitizes all 1000 and 500 rupee notes.
Bunny has a big problem. His all money worths zero now. He must exchange his 1000 rupees notes with smaller currency notes which he can't because for exchanging money, he must give a proof about source of 10 crore rupees.
(to government)
What if, Bunny burns all his money and again acquires black money, but this time in 10 and 100 rupee notes. Naturally it will become harder for him to store that money because he has five times more notes this time. Plus more notes means it becomes harder to use them.
Story ends.
Demonitizing 1000 and 500 rupee notes can be very effective in reducing general corruption in the country which will lead to prize drops of goods and services ultimately.
Also this will also affect bribe problems. Just think about giving someone 1 crore in 100 rupee notes only. One will have to use a mini truck at least.
Originally Answered: What happen when Rs.1000 and Rs.500 notes are withdrawn from India?
Honest common men has become a bit rich today with these announcement.
Let me explain you how: As a common men we had paid all our due taxes and levy through our income, however we still have to pay money in black if we have to purchase any real estate property etc., we have to give money under the table. However, at least for few months that black money has been removed from the system.
There are further ramification of banning of the high denomination notes. But before discussing the pros and cons of banning the notes of denomination Rs 500 and Rs 1000. Let us look into some facts about these high denomination notes:
- Together 500 rs and 1000 rs note account for 78.84%; 46.62% and 31.92% respectively.
- Cost of printing a 500rs note is 2.5rs and 1000rs is 3.17rs, whereas that of the Rs 5 is 0.48rs. The cost of printing each denomination.
- Due to cost of Printing, RBI wanted to introduce Rs 5000 and Rs 1000. Since RBI earns by printing the notes and selling them. Google
- Rs 1000 note was banned Previously also in 1977, by Morarji Desai government. Here's A Simple Idea To Fix India's Black Money Problem Once And For All.
Let us now look that what this move of the government will do :
- Lot of Tax revenue may be accrued through it, since around 78% money in circulation have been made illegal today. However,government has made no limit on the amount which can be deposited in the bank till 30th December. It may be a Honey Trap for the people having black money or maybe government would bring a new scheme to deposit the black money we will have to see. Anyways, it will bring lot of income to the government. Great way to move forward.
- A huge bubble was forming in the real estate market because of the Cash money. However, with this move this bubble will burst for good and the real estate will be in the reach of the common Honest man.
- Banks would get induction of liquidity in the system. This may not be a target of the government, but this is a Fringe benefit of the move.
- Fake notes will go out of Order for good, it can be said as strike on terrorism in India.
- Lot of Real Estate money will be removed from the market. Since, it is market with biggest stock of the Black money in cash.
- The biggest impact will be on the Gold traders, since it is much more liquid and are easier to purchase gold without any legal documents. With removal of 500 and 1000 rs notes, the money stashed illegally will be removed from the system.
However, despite all the benefit, there are certain things which these move won’t do:
- It will not remove the problem of black money by itself. Since, we will be reintroducing the 500 and 2000 notes. The black money will still be generated and the corruption would still be there through this notes.
- It would not remove the illicit black money stashed abroad by the corrupt people. That money can still be round trip.
- We may say that it is Cure rather than Prevention of disease, since cash by itself is not the problem but the misuse of the cash is problem.
Nevertheless, it is a bold move by government and it will definitely send the message across that government is serious against black money. The Jhumla’s were for real and not just an election gimmick.
We have to keep in mind that it is a start of a crusade against black money ( good one too ), However, a lot of things still needs to be implemented to fight out the corruption menace in the country. We should not get complacent with this move and continue our fight.
As per the RBI 2016 report there is 17.77L cr. currency in circulation & 86% which is 15L cr. of that is in form of Rs.500 and Rs.1000.
If I assume that 20% (though it's much more) of this amount is black money, then 3.54 lac crore lying as black money. As we all already know that if someone tries to deposit his black money then the person has to give tax + 200% penalty, which simply means that no one will try to deposit their black money into their bank account, so, this 3.54 lac crore will never come into the mainstream economy which is nothing but the profit of the govt. as it will reduce the liability of the govt.
To print a Rs.1000 note govt. spend only Rs.3, so if govt. print the all the notes of Rs.500, Rs,1000, Rs.2000 denomination then it will hardly cost 255 crore -1020 crore.
So govt. is directly saving a huge amount of money by abolishing the old currency notes.
Due to inflation, central bank needs to print bigger currency notes. For this big value notes, the ease of cash transactions becomes easier and it is untraceable too. For this, many people run their business without paying any tax which helps in the growth of the black money. On the other hand, this untraceable notes transaction helps to promote the corruption too. So, we finally get, Blackmoney + Corruption = Parallel economy.
Due to the large value note, people avoid going to the bank, which means that the money doesn’t go into the system and for the same it results in poor credit for capital formation. In India as most of these currencies lays into the people's wallets so the economic system isn't able to see the proper capital that it owns. For this, the capital flow slows down, which directly impacts our GDP growth.
With the help of small denomination note banking transactions will increase as with this small currency note cash transaction will become very tedious, which directly impacts the tax collection up to a significant extent. This tax will help not only to eliminate the black money, but also fake currencies will be eliminated too. Antisocial and anti-national people will be checked. It will help banks to increase their net revenue. And for the same banks can able to offer globally competitive interest rate. For this money, banks can offer cheap and easy capital. This will boost the purchasing power of the society. Ultimately, it will solve one of the biggest problems of this century that is unemployment. As the job opportunity increases, so the income will also increase which will directly impact positively on the overall economy.
Obviously it is a big step towards curbing the “Black Money”. Undoubtedly, at a cursory glance, it may seem to be one tumultuous situation but in reality, if we can manage to make our way through this mess for a few days, we will get benefited.
Some may argue depicting the scenario of Supply and Demand curves, some may say lots of people will try to exchange their 500 and 1000 rupee notes for 100 rupees note and it will eventually create a void of 100 rupees notes. But, there is always another side of the coin.
There are lots of people in India who are not paying taxes of their hefty INCOME. Black money does not only comprises money of Corruption or Extortion, it also includes the money that people usually don’t show to the Income Tax department. Lots of people in India are just deliberately hiding their money on their houses to get rid of humongous TAX payment. If this process of cancelling 500 and 1000 Rupees notes can afford to run in the desired way, it is not far when the Value of INR will increase. RBI has promised to circulate new notes (500 and 2000 rupees) to the banks.
So, suppose anyone is having amount of 10 Crore of Black money hidden in the basement of his house. He will try to exchange all the 500 and 1000 rupees notes for 100 rupees note but he can’t exchange this huge amount of money at once, in fact I heard that one can only exchange 2000 rupees at once for first few days. So, he can’t do anything to save his money and if you have heard the News Reporting of RBI Governor UrjitPatel and Finance Secretary Shashikant Das, you will most probably know that they averred that taking money from anyone or exchanging money on behalf of anyone in the form of 500 0r 1000 rupees is illegal after 12 a.m. of 9th Nov,2016.
Picture taken from: All India Radio News Facebook Page
And every exchange will be done under supervision of CCTV. So, one with hefty amount of money most probably has no way to purify his black money. And after 30th dec,2016 when new notes will be all available in the banks and markets those old notes which are meticulously hidden in someone’s basement will buy nothing.
So, after this one most probably think what good this step will be? How can this even stop black money?
For this answer you must know a little about RBI. On 500 and 1000 rupees notes you will find one line written as “ I PROMISE TO PAY THE BEARER THE SUM OF FIVE HUNDRED RUPEES ” (FOR 500 RUPEES) and it is signed by RBI governor. So, whenever they try to print money they have to submit some credits as Gold, and these 500 and 1000 rupees notes are just bills that are highly recognized in our Countries and you can buy money. If Black Money holders can’t use their money get purified the gold submitted for those all black money will be used to for printing new notes and hence those all black money will be back to Indian Government again.
I wrote it with all the knowledge I have just to serve one answer to the query, if I made any mistake I want to you correct me.
Thanks for reading this.
Suppose you’re a dedicated corrupt Business man or a politician who has accumulated 100’s of Crores in black money because you had no intention of paying taxes or you got it by illegal transactions. Now, once you transfer this money into bank , the money becomes accountable and is considered as “ in circulation & tax positive” . But if you hide it in bunkers or wells or house hide spots, you have to hide them in mostly 500 & 1000 INR notes because 10 & 100 notes will make lot of quantity to hide. So, by suddenly stopping the transactions in 500 & 1000 after work hours indicates the pre planning that was done to this decision. Now people will stop accepting 500 & 1000 as it is no longer legal because they will be accountable to what ever money they exchange with the bank.
So, if you have any money which is not tax positive & illegal, you need to quickly put it in transaction now at 9 pm. That too in diverse places, which is practically impossible. So you’re shitting your pants if you’ve got crores in liquid cash under your bed.
Also because of fake currency notes being in circulation , most of the notes are being put through bank checking. Terrorists sleeping with the confidence that they have so many fake 1000 INR will now find new sea routes to pakistan. So many problems will be solved here.
As the quantity of currency in circulation will decrease, the value of a single rupee will increase and the Stocks will hit new high because of the rupee increase & negative inflation which will be resulting out of this mechanism.
Here comes the AcheDin Haters :)
- Cut down on counterfeit money
- Tax evasion will decrease because without large denomination the tax payment will be difficult and be forced to move to digital payment which can better monitored and audited.
- Corruption will decrease.
- More currency notes will be needed through printing,as digital transactions are not popular in India more currency will be needed to maintain the same value of money in circulation.
- This will create a huge problem ,500 and 1000 rs note takes up 76% of the total value of all currency in circulation but when it comes to total currency notes these two represent only 17%,so to maintain the same value in circulation a single 1000 rs note decrease will have to be compensated by printing many notes increasing the total number of currency notes. Now one might think what is the harm in it if total number of currency notes are increasing ,well the problem is that Government spend close to 1500 crore rupees every year just to replace the damaged notes in circulation.More printed notes will cause the cost of handling the cash to zoom.
- ATM holding capacity will decrease .An ATM typically holds 10,000 notes,without 1000 rs note the rate of replenishment will increase .
Some of you may not be aware of this, but this sudden move is not new.
This is a picture of five thousand and ten thousand rupee notes that were in circulation earlier. Rs 1,000 and higher denomination notes were first demonetised in January 1946. Higher denomination banknotes of Rs 1,000, Rs 5,000 and Rs 10,000 were reintroduced in 1954 and all of them were demonetised in January 1978. The Rs.1000 rupee notes however, made a comeback in November 2000. Demonetisation has been done before.
We survived then, we will survive now. It may cause some hiccups here and there but one has to be far-sighted about this.
The support Prime Minister Modi is receiving from the masses, despite calling in for such a massive change is itself a proof of the positives this “surgical strike” could bring in the coming days.
So, senseless tweets like these can be ignored. (Look who’s re-tweeted it!)
The common man has always often dealt with currencies of lower denomination.
The move is a pre-calculated one and is put into effect only after proposing appropriate alternatives.
The move is a pre-calculated one and is put into effect only after proposing appropriate alternatives.
You just cannot deny the fact that the man, Modi has got some class. A new India is certainly on its way. Jai Hind!
The impact of demonetization after one month.
Preview:
A month into India’s demonetization initiative, long lines of people looking to exchange notes still spew out of banks, some sectors of the economy continue struggling with the lack of readily available cash, grassroots businesses are still being revolutionized with electronic payment capabilities, and masses of people continue transitioning towards new ways of paying for basic goods and services.
On Nov. 8, 86% of India’s currency was nullified in a great demonetization effort that aimed to clean out the black market's cash supply and counterfeit notes which completely disrupted the social, political, and economic spheres of the world’s second largest emerging market. All 500 and 1,000 rupee notes were instantaneously voided, and a 50 day period ensued where the population could (ideally) redeem their cancelled cash for newly designed 500 and 2,000 rupee notes or deposit them into bank accounts.
India has done this before. In 1946, all 1,000 and 10,000 rupee notes were recalled. In 1978, 1,000, 5,000, and 10,000 rupee notes were demonetized.
Modi’s demonetization initiative caused a sudden breakdown in India’s commercial ecosystem. Trade across all facets of the economy was disrupted, and cash-centric sectors like agriculture, fishing, and the voluminous informal market were virtually shut down, with many businesses and livelihoods going under completely -- not to mention the economic impact of millions of people standing in line for hours to exchange or deposit canceled banknotes rather than working or doing business.
POSITIVE IMPACT:-
- The demonetization process has repaired India's counterfeiting problem for the near to mid-term. It was previously estimated that 250 out of every million Indian bank notes were fakes. This recent culling of the bulk of the country's currency instantly rendered counterfeits as valuable as the paper they’re printed on. It has also been reported that the new 500 and 2,000 rupee notes are less vulnerable to counterfeiting, having advanced security features — with one report claiming that it will be “impossible” for Pakistan to fake them.
- However, the biggest potentially positive impact of the demonetization campaign for India's government is its inherent push to get more people onto the dominant economic grid, where they can be more readily regulated and taxed. India’s economy is essentially rooted in the cash-centric informal market, which is responsible for up to 45% of GDP and 80% of employment. Beyond that, up until the demonetization campaign, upwards of 95% of all monetary transactions were conducted in cash and upwards of 40% of the population were completely unbanked. By disrupting the engine which drove the cash economy, Modi hopes that more of the population can be brought into the fold by using taxable systems of economic exchange, such as bank accounts and e-wallets.
- If a large amount of people and businesses are brought into the bosom of the formal economy via the demonetization program, then India could be in for a boost in liquidity and an apparent increase in its recorded economic growth rate.
- This potentially broad swath of people being push onto the economic grid also theoretically means more revenue for the government coffers.
- Government reports from 47 cities in India indicate an overall 268% year-on-year increase in tax collection for November 2016, the month the demonetization campaign began. However, a good portion of this increase could be attributed to special schemes that were created for people to pay their past due taxes with canceled banknotes rather than a more integral improvement in tax collecting efficiency.
India is a country that has over a billion people, and such a drastic event as the government suddenly telling people that their money no longer has any value could have sent the place into mass hysteria. Although there have been many incidents of protest, demonstrations, and occasional bouts of panic, relatively speaking, the bulk of Indians seem to have taken to this transition remarkably dutifully. Millions of people have stood in long lines peacefully, enduring a rather irritating bureaucratic process that has disrupted their lives because many believe that it could be better for the country in the end.
Prime Minister Narendra Modi has called an emergency address speech, where he revealed to the country that 500 and 100 rupee notes are to be discontinued from midnight today. I know how defective decision it is but it is true and will be staunch decision of striking off usage of 1000 and 500 Rupee notes currency in India. This decision has been made by the present government under the PM who says, IMF and World Bank states India is an economic star now.Every citizen will be allowed to withdraw 10,000 Rupees from Bank or ATM per day and 30,000 per week which seems to be less. This ban on notes can be major stroke on Indian economy but we will, have to wait and watch how it turns out to be.
Why India Banned 500 and 1000 Rupee Notes
Why India Banned 500 and 1000 Rupee Notes
India Banned 500rs & 1000rs Notes from Today
India has made a strict decision of banning regular 500 and 1000 rupee notes from circulation which is a result of finding 1.25 lakh crore black money. Indian government believes that by taking this decision we can hit black markets down and you would be least circulation of black money and fraud would not take place.
Indian Announces 2000 Rupee Note Circulation
Instead of 500 and 1000 Rupee notes RBI will be issuing 2000 rupee notes which will be a regular currency circulation over India.All those people who are worrying what to do with the stacks of 500 and 1000 notes, need not to glaze and run punching on the government. Because they have released a statement saying that all the remaining 500 and 1000 rupees notes are to be deposited at neat by Post Offices
Well Indian finance is sure going to face chaos by the demoing plans of our beloved Prime Minister Narendra Modi. So, most of you might be wondering what more topics have been discussed and stated during this speech. So I have posted all of them below.• Sab ka sarkaar, sab ka vikas – governance and progress for all is our motto. We are focused on empowerment of the poor. A series of schemes we have introduced all aim at this. This is a government for our farmers.
• Corruption and black money are diseases rooted in this country, they are obstacles to our success.
• We are among fastest-growing economies, but we also rank so high in global corruption rankings.
• Terror strikes at the innocent. Who funds these terrorists? Across the border, our enemy uses fake currency and dodgy funds to sponsor terror – this has been proven repeatedly.
• Terror strikes at the innocent. Who funds these terrorists? Across the border, our enemy uses fake currency and dodgy funds to sponsor terror – this has been proven repeatedly.
• When you elected this government in 2014, world was talking about India being shaky economically. But India is now an economic star – this is what IMF and World Bank are saying.
Well Indian finance is sure going to face chaos by the demoing plans of our beloved Prime Minister Narendra Modi. So, most of you might be wondering what more topics have been discussed and stated during this speech. So I have posted all of them below.• Sab ka sarkaar, sab ka vikas – governance and progress for all is our motto. We are focused on empowerment of the poor. A series of schemes we have introduced all aim at this. This is a government for our farmers.
• Corruption and black money are diseases rooted in this country, they are obstacles to our success.
• We are among fastest-growing economies, but we also rank so high in global corruption rankings.
• Terror strikes at the innocent. Who funds these terrorists? Across the border, our enemy uses fake currency and dodgy funds to sponsor terror – this has been proven repeatedly.
• Terror strikes at the innocent. Who funds these terrorists? Across the border, our enemy uses fake currency and dodgy funds to sponsor terror – this has been proven repeatedly.
• When you elected this government in 2014, world was talking about India being shaky economically. But India is now an economic star – this is what IMF and World Bank are saying.
First congratulations to government for such excellent move.
Seems like everything is planned by government
- First open the bank accounts of almost every citizen. So they can put their money into banks instead of putting in home.
- Income declaration scheme to announce the black money you have and get relief by paying tax.
- Give the 50 day dead line with exchange limit of 4000. So person would not be able to hide more than few lakh rupees.
- Once the money is in bank, it will be under government's supervision these bastards wouldn't be able to save their asses.
- And once everything gets pulled back, introduce new currency which is even harder to be faked.
- The Reserve Bank of India (RBI) will be issuing Rs 2,000 currency notes, the highest to come into circulation, even as some experts feel high-value denominations should be discontinued to curb black money. There is no official declaration of Nano GPS System people are talking about. So I prefer not to say anything about that. But if that will happen, everything will be changed.
Let's see what black money is.
- In India, Black money refers to funds earned on the black market, on which income and other taxes have not been paid.
- In India only 1% of population files their income-tax return. Can you assume how much money will country get if everyone pays their tax? And how much development can be done using that?
- India has astonishing amount of black money not only in swiss banks but lying within. Any transactions which are not done with proper bill are responsible for this. This leaded to black money which these people would never deposit on bank to save income tax.
Sources: Indian black money - Wikipedia
Now from where this black money comes?
- There can be two different modus operandi involved in the generation of black money. The first is the crude approach of not declaring or reporting the whole of the income or the activities leading to it. This is the likely approach in all cases of criminal, illegal, and impermissible activities. The sophistication in such an approach mostly get introduced subsequently for the purpose of laundering the money so generated with the objective of making it accountable and converting it into legitimate reported wealth that can be openly possessed and used.
- The same approach of not declaring or reporting activities and the income generated therefrom may also be followed in cases of failure to comply with regulatory obligations or tax evasion on income from legitimate activities. However, complete evasion or non-compliance may make such incomes vulnerable to detection by authorities and lead to consequent adverse outcomes for the generator. Thus a more sophisticated approach for generation of this kind of black money is often preferred, involving manipulation of financial records and accounting.
- The best way of classifying and understanding the various ways and means adopted by taxpayers for the generation of black money would be the financial statement approach, elaborating different means by which the accounts prepared for reporting and presenting before the authorities are manipulated to misrepresent and under disclose income, thereby generating unaccounted, undeclared, and unreported income that amounts to black money.
- Any transaction entered into by the taxpayer must be reported in books of account which are summarized at the end of the year in the form of financial statements. The financial statements basically comprise statement of income and expenditure which is called by different names such as ‘Profit and Loss Account’ or ‘Income and Expenditure Account’ and statement of assets and liabilities which is called ‘Balance Sheet’ or ‘Statement of Affairs’. Tax evasion involves misreporting or non-reporting of the transactions in the books of account. Different kinds of manipulations of financial statements resulting in tax evasion and the generation of black money are...
Prime Minister Narendra Modi talked about fighting corruption and black money during his address to the nation on Tuesday. In a major step to check black money, the prime minister announced demonetization of Rs 500 and 100 currency notes. He said the government has been fighting the menace of black money and corruption ever since it assumed power two years ago.
Starting midnight on November 8, Rs 500 and Rs 1,000 notes will no longer be legal tender. Other currency notes, Rs 100, Rs 50, Rs 20 and Rs 10 are still valid, as are all coins. However, all cashless transactions, such as cheques, cards and demand drafts will continue as usual.
ATMs will not work on November 9 and November 10 in parts of the country, the prime minister said. Banks will remain closed on November 9.
The Rs 500 and Rs 1,000 notes can be submitted to the post offices and banks from November 10 to December 30 with an valid ID card such as a passport, PAN card or Aadhaar card. Those who are unable to submit notes till December 30 will be allowed to declare them with the Reserve Bank of India. There will be a cap of Rs 20,000 on the amount of money that can be exchanged in a week and Rs 10,000 in a day. Tourists can change these notes at airports.
A number of exceptions have been made at places of particular importance, where the Rs 500 and Rs 1,000 notes will be accepted for an additional 72 hours , that is till midnight on November 11. This includes hospitals, railway ticket booking counters, government bus stands, and airports.
What’s next:
New notes of Rs 2,000 and Rs 500 will be circulated soon, Modi said, though these will have limited circulation.
READ COMPLETE POST AT :- Rs.1000 and Rs.500 Notes to be Discontinued in India - The Indian Startup
It’s a bold Decision by the Government and can be called as the Surgical strike of the Government on Black Money (add Terrorist funding, arms smuggling and Counterfeit currency to that).
Currently Rs 17,54,000 crore worth of notes are in circulation according to the RBI’s database on the Indian economy.
Of this Rs 500 notes constituted almost 45% of the currency in circulation while 39% of the notes were of the Rs 1,000 denomination. In value terms.
However in terms of volume, Rs 10 and Rs 100 notes constituted 53% of the notes in circulation.
Immediate Impact: Heavy Deflation
Initially there will be heavy deflation as people who have earned money through illegal means such as smuggling, corruption would be afraid to declare the money as they might be prosecuted by Govt/Income Tax Dept on the legitimacy of their income.
This will reduce the total currency circulation in the economy - leading to deflation. Deflation increases the value of money that we have because the total money supply goes down but the commodities and things available in the market have not gone down.
Gold prices, stocks & commodities will drop.
This will also lead to Inflation (not overnight)
There will be a lot of people who have a lot of cash, legally earned, which they will deposit it in the bank.
Now the bank with more deposits can do more lending.
Credit (loans) will become easier and interest rates may come down. More loans given out increases broad money supply and creates inflation. But this will happen slowly, not over-night.
Deflation and Inflation will balance out each other in the future.
Some of the benefits of this movie are: (Pros)
- It will help the government to fight Black money, corruption, terrorism and counterfeit currency with one single decision.
- Arms smuggling, espionage and terrorist related activities will be choked due to lack of funding.
- Counterfeit currencies are being used for financing terrorism which is being run by the enemy in India. Now Govt has taken a bold move which enables them to fight counterfeit currency/terrorist funding activities.
- With the new limits on ATM withdrawals being restricted to Rs 2,000 per day, withdrawals from bank accounts limited to Rs 10,000 a day and Rs 20,000 a week, it will drive the card payments across the country (In simpler words card transactions will slowly replace the cash transactions in daily activities).
This measure would mean that from midnight, 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.
Let me explain how the rendering of 500 and 1000 Rs bank notes almost extincts black money and also makes our economy better:
1) Extinction of Black Money: The people(crooks) who have black money i.e. money unaccounted for in the tax returns will find that their stashed bills of money are worthless since if they goto the bank to deposit/exchange these black money, they will be caught. Now people can argue that people may have black money in 100 rupees note tenders. But I ask you, if u are keeping 10 crore Rs, will you keep them in small denomination of notes??? Because you would need to to hide these so to decrease the volume of notes crooks keep them in 500 and/or 1000 Rs bills.
2) Betterment of Economy: When these black/unaccounted money becomes worthless, the guarantee made by the government/RBI to pay the bearer to the bill goes away. Which means it reduces the liability of the government. This would mean that the value is created which then can be used for better roads, health care, etc etc by printing new notes.Hope you get a slight idea about the positive impact of the move by the government. Feel free to comment if you disagree or agree.
It also prevents the use of fake money by the terrorist to carry on their activities in India.
It also prevents the use of fake money by the terrorist to carry on their activities in India.
The reasons as stated by various media houses and the government agencies for the aforesaid decision to demonetise 500 and 1000 currency notes and my personal opinion on these very reasons are-
ELIMINATION OF FAKE CURRENCY FROM THE MARKET.
A lot many fake 500 and 1000 currency notes have come in circulation as the government substantially provides data of increase of these denominations beyond reasons. And that's why we all were very carefully scrutinising each 500 and 1000 note for its authenticity, which we used to come across, but not the other denomination notes. The enemies of the country who had ( rather have) acrimonious and malicious intentions to harm the country got to develop and imitate the currency replica and these notes were then introduced in the market, which aims in shattering of the economy from roots, as the fake notes will get you the service or goods, but without value. This demonetisation mainly aims to address this problem. The new notes will be different and equipped with new technological advancements which would be now difficult for the enemies to replicate.
TERROR FUNDING
There is always a strong propensity of the enemy nations or the organisation to destabilise the Indian sovereign structure as they always intend to harm in one way or the other ( adversaries indulge in this often) and all the fundings of these terror groups and organisations ( like kashmir unrest, Naxalite attacks, hate crimes etc prevalent in the country). So all the money would now be waste as it would stand of no value and they would now not be able to carry out their coveted operations without money, they will not be able to buy arms and ammunition , will not be able to buy people and other human resources. And the whole wealth accumulated for such use would now become useless. So there will be curb on terror or other related activities for the time being, but it is not uprooted permanently as with due course, other ways will be trenched.
HAWALA TRANSACTIONS
Hawala transactions are the covert transactions which are undertaken for many purposes, like converting a black amount to a respectively lower white amount, the movement of black amount to different parts of the country and all. These activities which used to serve as an easy escape and provide assistance in funds movement will be curbed and checked for the time being…and yes that too not permanently.
ARREST THE CRIME RATE
The step will definitely arrest the crime rate for some time, as the goons, the unsocial elements would now not be paid by their clients to harm someone else, as these people were been paid by this undisclosed proportion of the wealth accumulated by people..and now no one would put his lakhs of white amount in these activities. The politically motivated crimes will come to halt. The wealth already accumulated by such unsocial miscreants would now get useless as they are left with no option now. They can neither dump this illegitimate money in property market or gold nor put in their bank accounts. So the money on which they used to dance and sing, will become futile. The future crime rate is gonna fall as well with the advent of new currency notes as it imposes an obligation and no one will convert his white into black.
UNACCOUNTED MONEY(BLACK) WILL GET ACCOUNTED
The taxes been evaded by rich businessmen, the illicit wealth accumulated by politicians, would become worthless…so a common man now has some instance of relief and cheer on seeing a corrupt person suffer. The government did not give enough time to park their money and the properties acquired by them where they used to park money will not attract any customer in near future as the market values are often high and very few have such sound bank balance to buy properties worth crores and that too white…
The only option left with them is to show the money they have if they wanna save their illegitimate earnings..they will be now charged tax by IT and other agencies will the scrutinise them. Black money will now come into the mainstream and will be used constructively which otherwise was not been put outside personal pursuits. This unaccounted money will now be taxed which will increase governments revenues leading to more government schemes and which will be put in nation's interest. Government and state sponsored banks will now have lot of funds to be put in use. It will have a huge positive impact on the inflation rates, interest rates, and the overall economy ( if the government do not become precarious….)
THE CONS
Every thing do carry some pros and cons, and as I don't have any commerce or finance background, i may be wrong at some point..but the cons which I think glued with thisove are-
1. First and foremost it is to be understood that it is not at all a permanent solution to all the malice of black money, terror, crime, money laundering…it is not a panacea, but a relief for some time from the above listed social problems. For the time being, people will not find a way out, that's why these money flows will be occluded, but as the new currency will come into play, people will again start evading taxes, hide the money and the black money ( this time pink notes) will penetrate the economy, though it will take few years.
Corruption would not stop…but unlike the 1000 hari patti, now babus or their ancillaries will now ask for a minimum 2000 laal patti . The corruption will not stop, black will again start accumulating and will again come in market.
Goons and miscreants will then deal in new currency….the things will come to first stage itself. Yes, duplicity of currency will be 100 percent controlled for a lot many years. People may argue that new notes are equipped with GPS but that would be used in selective cases only.
The probable attacks on our motherland are been choked with this move but not permanently.
What I strongly feel that this move is palliative rather than permanent for dealing with black money menace. The maim problem why people evade taxes lies in the fact that there are too many taxes and that too at exorbitant rates, due to which people resort to hide money from government. The government should understand this and take the citizens into confidence by reducing the number as well as rate of taxes..if people start feeling that they are earning enough and the taxes are now no hurdles in their common households, then they will themselves pay taxes( yes a strict watchdog is still required and I emphasise strict) after all who wants to make his earning black that accompanies a lot of problems with it. The crime and corruption menace totally depends on the execution of various agencies if we want a permanent solution, after all, it's the police who has to look after law and order and these are the agencies who have to be dog-eared.
The move somewhere down the line, is a boost to already established big business houses, not for a common man like daily wage workers, farmers, low and medium provide traders. The banks will gain, IT sector will gain, as more money will come into play…and moreover, being a bit cynical, the government will have more funds in their treasury and obviously more chances and opportunity of embezzlement( if the intentions or nit good). So I really sense a Nexus between business houses and governments, who aim to eat up more money….i n the wake of national security concerns.
Thanx.
The Reserve Bank of India has very nearly completed preparations for introducing this new high-value currency, sources said.There has been no official word on the introduction of new notes either from the RBI or the government. The government, on the advice of the RBI , decides on various denominations of banknotes to be issued.
The incidence of cash transactions and the huge volume of high-value currencies is unique to India, notwithstanding recent efforts to move towards cashless transactions. The two topmost currencies — Rs 500 and Rs 1,000 — accounted for about 86 percent of the new currency notes added in 2014-15, according to RBI statistics.
Currency notes and coins are printed/minted at about eight units owned by the Security Printing and Minting Corporation of India Limited (SPMCIL), a finance ministry company. SMPCIL’s two currency printing units — at Dewas in Madhya Pradesh and Nashik in Maharashtra — print about 40 percent of India’s currency notes. Coins are minted at Mumbai, Hyderabad, Kolkata and Noida units of SMPCIL.
Currency notes and coins are printed/minted by the government of India on the advice of the RBI, which also estimates the denomination-wise currency needs, and co-ordinates with the government on design and security aspects.
The highest denomination note ever printed by the Reserve Bank of India was the Rs 10,000 note in 1938 and again in 1954. These notes were demonetised in 1946, and again in 1978.
India is all set to add one more denomination to its currencies shortly. The Reserve Bank of India (RBI) will be issuing Rs 2,000 currency notes, the highest to come into circulation, even as some experts feel7 high-value denominations should be discontinued to curb black money.
The Rs 2000 currency is designed keeping in eradicating black money.
*Just a beginning of the end of black money in India*
Aimed at combating corruption and black money, this move will also cause short-term pain and chaos for the working class, small businesses and nearly anybody who deals with cash on a daily basis.
“This has come as a surprise to everybody. The citizens, the nation and even within most of the government!” economic affairs secretary Shaktikanta Das said at a late-night press conference on Tuesday, an hour after Prime Minister Narendra Modi announced that Rs 500 and Rs 1000 notes would cease to be legal tender at the stroke of midnight.Why was this decision taken? What effect will it have on customers, banks and India Inc?Let us see:Why ban Rs 500 and Rs 1000 notes?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 1,000 bills. In his speech, Modi specifically pointed out that these large-value notes were being used to finance corruption and fund terrorism.The Financial Action Task Force, a global body that looks at the criminal use of the international financial system, notes that high-value bills are used in money laundering schemes, racketeering, and drug and people trafficking Resources and Information. India, the Rs 500 and Rs 1,000 notes also constitute a huge percentage of the money spent by governments, political parties and candidates during general elections. A Centre for Media Studies report showed that nearly Rs 30,000 crore was spent during the 2014 general election, while official spending only accounted for Rs 7,000-Rs 8,000 crore.This of course only scratches the surface: major industries such as real estate have historically been conduits of black money.The most important fact, however, is that the share of large-value notes has only been increasing over the years. While some of this is no doubt due to the natural growth expansion of our economy, it also hints at the increasing size of our black money economy.Modi’s decision to decommission Rs 500 and Rs 1,000 notes should ideally not hurt most individuals in the long-term, although it will have a significant negative impact on the working class and small and rural businesses in the short-term. Economist Ajit Ranade’s back-of-the-envelope calculation shows that the highest face value in India should be around Rs 250; simply put, Rs 250 is the highest-value note that most Indian individuals should need.On the other hand, what needs to be noted is that there’s no good estimate for how much of India’s black money is in forms other than currency/physical notes such as gold, jewellery, land or any other form of wealth. Therefore, while banning Rs 500 and Rs 1,000 notes will tackle the black money that is in the form of hard cold cash, it won’t affect other forms of black money. On similar lines, this move will, obviously, have little effect on black money stashed away in foreign tax havens.
How is this going to impact urban consumers, small businesses, large businesses?
Over the next month, there will undoubtedly be a significant shortage in cash supply: not just Rs 500 and Rs 1,000 bills, which are being taken out of circulation, but almost every other denomination as well.Why? Firstly ATMs will be closed on November 9 (pan-India) and November 10 (in some places). This is being done in order to remove all existing Rs 500 and Rs 1,000 notes from the ATMs and replace them with lower-value bills.Multiple experts and government officials, however, have said that this process will likely take one to two weeks in urban and semi-urban areas and up to a month in remote and rural regions. In the meantime, long queues at ATM have already started. People are withdrawing smaller notes to stock up, so there will be shortage in the days and weeks AHEAD AS | Et WordPress-nettsted a consumer, if you depend on small notes (which is the great majority of ...
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PM Modi’s overnight revolutionary decision has stirred turbulence in every nook and corner of the country. A grand welcome to this artful move, decisive motive and resolute effort of the PM!
Onset of Cashless Economy, End of ‘Diseased Cash’
A commendable effort for uprooting the deeply set corruption! A move to begin the era of cashless economy! An attempt to get hold of and get rid off and get aware of the ‘black’ holdings!
An immediate not-so-well impact will be there for sometime (or for few days!). The ban will affect every level of the society: higher, lower and mediocre. But forecasting the long run implications, can shed light on the ‘invisible’ effects of this move.
Though it may seem distantly apart, but the correlation will baffle all the job aspirants. It isn’t a simple game changing move; instead it has a greater meaning hidden in it. For all the prospective job holders and current aspirants, here’s a brief analysis.
As per the recent report obtained from trusted sources, it will cost Rs 12000 crore to RBI for replacing all the 500 and 1000 notes in the country. As per an estimation a total of 1567 crore of Rs 500 notes and 632 crore of Rs 1000 notes were in circulation till the ban was imposed on them.
How will the effort to curb black money and counterfeit currency notes, affect the government job sector of the country? How will it benefit govt job aspirants? Will there be any adverse effect? Read here full article
Here are some of the downsides I can see in the short term :
- Inconvenience to the Poor : Most of the rural and urban poor in India are un-banked i.e. they don’t have bank accounts. (Precisely this the reason the Jan Dhan Scheme to open Bank accounts was launched, now we can see the other purpose of the scheme). These people- the migrant labourers, the landless workers, the potters, the contract labourers, the street vendors, rickshaw pullers,female workers keep the money stashed at their homes.
- Their life savings are in cash amount. They will face an uphill challenge to get the money converted into currency notes of valid denominations.
- They are not connected to banks or any formal channel of banking. No Identity proof may may be available which are required for exchanges above Rs 4000.
- It is even possible that there is no bank or post office nearby.
- Most of them will be afraid to go to banks and be nervous at this stage.
- They will have to spare a day’s work to go for re-encashment, hence loss of work.
- They may even face harassment at the hands of Bank officials to get the money exchanged. They may even have to pay bribes
- The Disadvantaged lot: Old people, disabled, sick, transgenders and prostitutes will be especially impacted. The above category of people will be deeply inconvenienced to go to banks to exchange their money. The transgenders and prostitutes keep all of their money in cash with themselves. Due to the inherent bias of the society they may choose not to go to banks themselves instead hire a middleman for this purpose who will not only charge for fees for their services and but also cheat a large amount.
- Emergency Situations: People who need money for some urgent work like to see a doctor, pay hospital charges, medical emergency, travelling etc will be in a highly difficult situation as no one will accept their money (even if they have it) if in denominations of Rs 500 or 1000 notes. The ATMs and banks closed for two days, hence they will have no other resort (except of net-banking). Although the government has made provisions to minimize the inconvenience of these people- upto next 72 hours these notes will be accepted at Government agencies. But it may not suffice in majority of situations: in case of emergency, for example, one cannot choose to go to government hospital.
- Impact on Households: It is an Indian thing in villages and small towns for housewives to keep their saved cash hidden away from their husbands and other family members. Invalidation of Rs 500 and 100o notes will jeopardize this scheme. Households with liquor problems will provide the husbands to seize control of the hidden cash. Also, general day to day purchase may be impacted due to lack of cash in hand.
- Impact on Agriculture: The months of November and December are the season for sowing of Rabi crops (in most of India) and Samba crops in Tamil Nadu. This season requires a lot of cash in hand for purchasing seeds, pesticides, fertilizers, hiring labourers etc. All these activities will be severely hampered due to want of required cash.
- The informal sector: Contract laborers in organised and un-organised sectors are paid their daily-wages in cash. Now the contractors can delay the wage payment for few days till things settle down. These laborers will have to face hardships for comings days since they live a life on hand to mouth earnings.
- Gold: Now since the black money stored in cash gone in one shot, the corrupt may start saving their black money in some other easy investment to avoid any loss in future and the easiest option might be keeping them in gold and silver so that they can be en-cashed with ease in future. This may lead to increase in gold imports in long run.
- Indian Economy: Most of the business in India has cash transaction with less than 2% business transactions taking place electronically. This move will cause severe cash crunch for both the customers and the sellers. Hence slow down the business in coming weeks. The small artisans and street vendors will be most impacted. The fast growing e-commerce segment which was made popular due to COD (Cash on Delivery) model will have slow business for few weeks.
- Foreign travelers: Tourists in India will have to queue in banks to get the notes changed. Also, Indians who are on foreign visits may not be able to come back to India immediately, hence locking their money.
- Privacy may be lost: The financial situation (privacy) of families who store money in cash may be exposed to gaze of others, in the process of money exchange at banks risking their life situations For example: may lead to extortion and kidnapping in poor law and order districts.
- Panic and awareness: There will be a panic like situation for many cash holders due to lack of awareness. Big rush conditions in banks and post offices may disrupt the other regular services of Banks and Post Offices like loan disbursal, postal services etc as most of the manpower will be utilized for this note exchange activity in the upcoming weeks. There can be many cases of cheating as well due to lack of knowledge and awareness of people
"Corruption, fake currency and terrorism are festering wounds, holding back the economy,"
India will abolish the country’s largest currency notes in a fight against unaccounted wealth and corruption, Prime Minister Narendra Modi said in an unscheduled address to the nation.
Rs 500 and Rs 1,000 currency notes will no longer be printed.
For the next 50 days, up until 30 Dec 2016, one can deposit their old notes of 500 and 1,000 rupee denomination in post offices and banks. One needs to take their Aadhaar card and PAN card to exchange these notes.Currency notes of Rs 1000 and Rs 500 will be just paper with no value, said the PM in his address.
They will cease to be legal tender from the midnight of November 9.
There will be no change in any other form of currency exchange be it cheque, DD, payment via credit or debit cards etc, said Modi.
ATMs will not work tomorrow and all banks will stay shut for public work for the day.
Those unable to deposit their notes of Rs 1,000 and Rs 500 by December 30 for some reason, they can change the notes till March 31, 2017 by furnishing ID proof.
Rs 2,000 denomination notes to be introduced.
A bold move by the govt. however IF they introduce Rs. 2000 denomination, I dono what good it will do.
- If there is fishing net put up in a pond, All fish will try to run away from the net. Same way this surgical strike on black money will give a fear of getting caught (When submitting the money into bank) or value loss (If keep the money in cash after Dec’16). So people with black money (Clean source of income, but no tax declared & illegal sources of money) will get fear & try to run away from the scenario.
- But as always, the most of the bigger fishes in the pond will escape from all these man made situation.
- I wonder, How much money the hundi (Donation box in temples) will get in next few months. Because People have so much money in cash don’t trust anything other money. Not even properties, jewels, assets etc. So they keep money in cash not in Bank or some instruments. They don’t trust people so they don’t do Benami Transactions. So, they hato put somewhere. One of the feasible option is donate the Physical amount (500INR & 1000INR denominations in Hundi & pray for good white whealth.
photo courtesy: Google
Thank you Subhisha S for the encouragement :)
Prime Minister Narendra Modi was elected to take big, transformational decisions. He hasn't exactly been full of such decisions in the past two and half years - but he showed today that he was certainly capable of them.
The decision to ban existing 500- and 1000-rupee notes has a certain economic logic to it. Certainly, the absence of large-denomination notes will make it harder for people to keep black money in hand. That said, there are no clear estimates as to how much black money is in actual currency notes, and how much in land or gold or other forms of wealth.
But the point behind Modi's announcement wasn't to actually change the way that the black money economy works. It was to show that he is capable of doing something - of strong leadership. And, from that point of view, it was a sign both of desperation and brilliance.
Modi is now reaching that point in his term in office when the promises he made in 2014 are coming back to haunt him. He spent the last week under a spotlight because of the One Rank, One Pension (OROP) agitation - something that he politicised to start off with, and on which he has failed to deliver to the satisfaction of many ex-servicemen. Two and a half years into his term, their patience was at an end. I wrote last week that it was only the beginning of a long-overdue accounting for Modi's extravagant promises on the campaign trail in 2013 and 2014.
The promise to "bring back black money" was another such promise, one even more resonant than the OROP promise. Rare was the BJP voter in North India who was not convinced by the party's skilled propaganda, and by statements from senior leaders that they had personally been defrauded of lakhs of rupees (Rs 15 lakh is the generally accepted figure) by Sonia Gandhi, Manmohan Singh, and a cabal of sinister figures from the Vatican, Switzerland, and Dubai. Modi would end the black money economy, we were told. Whether or not Modi specifically promised to bring back 15 lakhs and put it in everyone's bank account, there's little doubt that many of those who voted for him expected some cash in their account from black money.
Well, that hasn't precisely worked out, has it? It is one of the most effective weapons in the opposition's arsenal, in fact. Rahul Gandhi had a lot of fun last year comparing the Prime Minister's "10-lakh suit" with the absence of 15 lakhs in people's bank accounts.
People may be led to believe any number of things by the government's skillful control of regular and social media. They may believe that everyone in the world suddenly started "respecting" India in 2014, that Pakistan and China are on the run, that there hasn't been a single shady deal since May 2014, that Acchhe Din have come to India in general, just not to their particular village. But you definitely can't be led to believe that a black money refund has arrived in your bank account when it very certainly hasn't.
In other words, the black money issue was one of the most vulnerable for Modi. And that's what underlies the sudden and swift decision to outlaw Rs 500 and Rs 1000 notes. It's something that every single voter will get to know about - no exceptions. And it's something that each and every one of them will be told is meant to cut down on black money. They may not be getting any money in their accounts, as they expected, but they will go away with the solid impression that their Prime Minister is certainly doing something about it. There are enough voters in the world who don't much care what sort of decision you take and whether it works - if it's big and courageous enough, they will just admire you for having taken it at all. That's the angle that Modi's going for.
Make no mistake: this is the beginning of Narendra Modi's re-election campaign. No more coasting along, no more promises he can't deliver on. Now he's going to focus on changing the subject from everything he hasn't been able to do since 2014. If the opposition fails to figure out that's happening, then they'll be so far behind when 2019 rolls around that they won't be able to put up a fight. And if the opposition isn't nimble enough in constructing counter-narratives, they won't stand a chance even if they try to fight. Each time a voter sees or misses a 500-rupee note, will he praise Modi for making an effort - or condemn him for making life more inconvenient for his own ends?
The answer to that question depends on how well the opposition mobilises its counter-narrative. And the answer to that question will determine whether Modi's big gamble pays off politically or not. But make no mistake - this is the first of many such gambles. Modi is India's first modern politician. He knows better than anyone else in this country - except perhaps Arvind Kejriwal - how to seize a narrative. He certainly knows exactly how to turn it around, and to his advantage. Let's see if this one works, and what gambles will follow in the months leading up to the Uttar Pradesh election - and beyond.
- Curbing Black Money Menace- All black money which are of 500 and 1000 dimensions will be just a piece of paper now so people who have black money ,for them its alarming situation.
- Stopping of fake currency-Market is flooded with fake notes,now these fake currencies are just piece of trash. So new notes will take considerable type to reduplicate.Hence this will fight fake currency.
- Funding-Illegal money which is used to fund terrorist activity and other illegal acts will now face serious consequences
- source-PM Narendra Modi Says Rs 500 And Rs 1,000 Notes Being Discontinu
Comment if you have other important points .
You know now whats is happening right now after 500 & 1000rs notes are banned in india.
- Old High Denomination Bank Notes ( 500rs note & 1000rs note) may be deposited by individuals into their bank accounts and/or exchanged in bank branches or Issue Offices of RBI till the close of business hours on 30th December, 2016.
- Old High Denomination Bank Notes of aggregate value of Rs.4,000/- only or below held by a person can be exchanged by him/her at any bank branch or Issue Office of Reserve Bank of India for any denomination of bank notes having legal tender character, provided a Requisition Slip as per format to be specified by RBI is presented with proof of identity and along with the Old High Denomination Bank Notes. Similar facilities will also be made available in Post Offices
- The limit of Rs.4,000/- for exchanging Old High Denomination Bank Notes at bank branches or at issue offices of Reserve Bank of India will be reviewed after 15 days and appropriate notification issued, as may be necessary.
- There will not be any limit on the quantity or value of Old High Denomination Bank Notes to be credited to the account of the tenderer maintained with the bank, where the Old High Denomination Bank Notes are tendered. However, in accounts where compliance with extant Know Your Customer (KYC) norms is not complete, a maximum value of Rs.50,000/- of Old High Denomination Bank Notes can be deposited
Originally Answered: What happen when Rs.1000 and Rs.500 notes are withdrawn from India?
A really smart move, I must say.
Now that old not will be useless. People will exchange them for new ones or deposit them in bank. What about people who have tons of black money sitting in their house? That will be useless. Yes, they will try different tricks but they will still loose a lot. I am wondering why no one ever thought of this before.
Frequently Asked Questions (FAQs) on Withdrawal of Legal Tender Character of the Old High Denomination Bank Notes
1. Why is this scheme?
The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw has been introduced.
2. What is this scheme?
The legal tender character of the notes in denominations of ₹ 500 and ₹ 1000 stands withdrawn. In consequence thereof withdrawn old high denomination (OHD) notes cannot be used for transacting business and/or store of value for future usage. The OHD notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches or at any Head Post Office or Sub-Post Office.
3. How much value will I get?
You will get value for the entire volume of notes tendered at the bank branches / RBI offices.
4. Can I get all in cash?
No. You will get upto ₹4000 per person in cash irrespective of the size of tender and anything over and above that will be receivable by way of credit to bank account.
5. Why I cannot get the entire amount in cash when I have surrendered everything in cash?
The Scheme of withdrawal of old high denomination(OHD) notes does not provide for it, given its objectives.
6. ₹4000 cash is insufficient for my need. What to do?
You can use balances in bank accounts to pay for other requirements by cheque or through electronic means of payments such as Internet banking, mobile wallets, IMPS, credit/debit cards etc.
7. What if I don’t have any bank account?
You can always open a bank account by approaching a bank branch with necessary documents required for fulfilling the KYC requirements.
8. What if, if I have only JDY account?
A JDY account holder can avail the exchange facility subject to the caps and other laid down limits in accord with norms and procedures.
9. Where can I go to exchange the notes?
The exchange facility is available at all Issue Offices of RBI and branches of commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post Office or Sub-Post Office.
10. Need I go to my bank branch only?
For exchange upto 4000 in cash you may go to any bank branch with valid identity proof.
For exchange over 4000, which will be accorded through credit to Bank account only, you may go to the branch where you have an account or to any other branch of the same bank.
In case you want to go to a branch of any other bank where you are not maintaining an account, you will have to furnish valid identity proof and bank account details required for electronic fund transfer to your account.
11. Can I go to any branch of my bank?
Yes you can go to any branch of your bank.
12. Can I go to any branch of any other bank?
Yes, you can go to any branch of any other bank. In that case you have to furnish valid identity proof for exchange in cash; both valid identity proof and bank account details will be required for electronic fund transfer in case the amount to be exchanged exceeds ₹4000.
13. I have no account but my relative / friend has an account, can I get my notes exchanged into that account?
Yes, you can do that if the account holder relative/friend etc gives you permission in writing. While exchanging, you should provide to the bank, evidence of permission given by the account holder and your valid identity proof.
14. Should I go to bank personally or can I send the notes through my representative?
Personal visit to the branch is preferable. In case it is not possible for you to visit the bran...
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Originally Answered: What happen when Rs.1000 and Rs.500 notes are withdrawn from India?
- Lubrication in Circulation: Money is the lubrication that makes the market economy possible. A large portion of this lubricant was immobilized in the form of black money. Rs 500 and Rs 1000 shares a major part. Due to this immobilization government is bound to circulate more currency notes in the market to keep it running.
- In simple terms, say, government gives you 100 potatoes to distribute in the market. Instead of distributing all, you circulate only 80 pieces. Rest you preserve for your own benefits. Now for the fulfilment of the requirement, government will provide you 20 more potatoes, out of them you circulate only 16 and this keeps going on. Government have to invest more to fulfill the need and you will eat more as compare to others. Here, ‘you’ refers to market. This cause inflation.
- Now imagine, somehow government raids on you and liberates all the stored stock of potatoes. Surely stock will be huge which will help government to fulfill the need without any expense. It can distribute the extra potatoes to those who require the most. Now, replace potatoes by money and imagine the outcomes.
- Foreign Trust: Transparency is always welcomed, specially in business. It is the most important gradient for foreign investors. Everyone like to have their money in safe hands. Black money is a major factor in India which inhibits the rapid growth in private sector. When a company decides to invest in a product they can calculate almost every kind of expenditure they will have to face except bribe. Ratan Tata has shown his irritation about corruption and bribe many times. So decreased black money will surely help Indian government to gain trust from foreign investors.
- Hard Money to Digital Money: Though, it is the first of its kind, but we may have to face these surgical strikes on black money in the future too. This will give some time to people to understand the need of digital money in the current era. We have seen some inspiring pictures where vegetable seller is accepting money via PayTm. India is changing.
- Zero Counterfeit Notes:
- In India, the circulation of fake Indian currency notes (FICN) has been on the rise, according to the Reserve Bank of India’s (RBI) annual reports. The year 2014-2015 saw a steep rise, with 594,446 FICN detected, up from 488,273 in the year 2013-14. When it comes to the type of notes counterfeited in 2014-15, RBI data showed that counterfeited Rs 500 notes were most common, with 273,923 recorded. Rs 100 and Rs 1000 notes were the second and third most counterfeited bills, respectively (source).
- Most of the FICN are printed in Pakistan. Major transit points include India’s neighboring countries Nepal and Bangladesh. Other transit routes includes Dubai, Thailand, Malaysia, Sri Lanka and China (source).
- Now all this FICN is equal to ZERO.
- Rein on Terrorism:
- The ISI has been making a profit of 30-40% on the face value of each counterfeit Indian note produced in Pakistan, according to the report. The cost of printing a Rs 1,000 counterfeit note, for instance, is Rs 39 (the RBI spends Rs 29 to print a Rs 1,000 note), but it is sold at Rs 350-400, according to the report.
- It is a measure source of funding for these terrorist groups.
- Now all these funding will be equal to ZERO.
- Deflation: Deflation refers to situation, where there is decline in general price levels. It increases the real value of money and allows one to buy more goods with the same amount of money over time. All of the above mentioned points will lead to the decrease in inflation which will automatically increase deflation rate. Goods will be cheaper and facilities will be in the range of poor people. Here is an example.
Anonymous
Here are the 10 things to know about 500 & 1000 notes banned in india
Prime Minister Narendra Modi called an emergency address speech, where he revealed to the country that 500 and 100 rupee notes are to be discontinued from midnight today.
He told ” I know how defective decision it is but it is true and will be staunch decision of striking off usage of 1000 and 500 Rupee notes currency in India.”
- Counters for railway, bus and air tickets too will accept these notes for 72 hours for purchase of tickets.
- This will also be allowed till Nov 11 at petrol stations authorised by public sector oil companies, milk booths and crematoria and burial grounds.
- Coins too will continue to be legal tender. Online transactions and card payments will not be affected.
- The RBI has accepted a proposal for new 500 and 2000 rupee notes, the Prime Minister said.Notes of Rs. 100 and lower denominations will all continue to be legal tender.Read : 1000 rs and 500 rs banned india from today!
- Banks will be closed tomorrow for public transactions and ATM will not function – in some places also on Thursday November 10, said PM Modi – to allow banks to make changes.
- After December 30 [Read More]
Increased currency in circulation is a burning issue we are facing now. As on April 29, total value of currency in circulation has reached Rs 16.50 lakh crore, an increase of 15.32% compared to same period last year. This 15% plus yoy growth is happening continuously for the last 2 months now, something not seen after July 2011.
There are several theories explaining this spike. The first theory states that it is because of the just completed assembly elections in five states. But a close look at currency in circulation data will reveal that the increase is more gradual and therefore, these elections are not the main reason behind this spike. More importantly, there were bigger elections earlier and the currency circulation was smaller then. For example, currency in circulation now is 27.55% more than 2 years back, when national election was going on.
Increased banking restriction may be another reason for this. For example, you need to furnish PAN details now for depositing more than Rs 50,000 in cash. Due to this, black money stays outside the banking system. Co-operative banks used to be a safe haven for tax evasion because they were exempt from deducting TDS on deposit by members. Now they have to deduct TDS for everyone, including its members.
Since black money can’t be used for buying financial assets, the same is used for purchasing mostly real estate and gold. The cash component is still very high in real estate transactions. The government’s efforts to tackle gold import by imposing 10% import duty compounded the problems further. Though official gold import figures have come down, a large part of that shifted to smuggled route. Foreign payment for smuggled gold can’t happen through official banking channel and has to be either smuggled cash or through some other stuffs smuggled outside. Similarly, from smuggling point to the end consumer, transactions have to happen in cash.
Situation has come to such level that this has started hurting bank’s deposit growth. So what should the government do? No need to dilute anti-money laundering measures because they are in right directions. Reducing gold import duty is one solution as it will reduce gold smuggling and resultant need for cash transactions.
Since more than 80% of money in circulation are through Rs 500 and Rs 1,000 notes, the best solution to this problem is the withdrawal of these notes from circulation. How will it benefit? First, withdrawal of Rs 500 and Rs 1000 rupee notes will result in immediate unearthing of black money. This is because people who are hoarding black cash currency will be forced to come to banking system for converting.
Second, withdrawal of high denomination notes w ill help to reduce black money generation in future. This is because it will become difficult to deal in cash, especially for large deals that runs into crores. Smuggling of Indian currency outside also become really difficult. This is very important for our national security also because terror outfits usually use smuggling and black money route for financing. Major economies have already started taking steps in this direction. Only recently, the European Central Bank has decided to stop printing Euro 500 bank notes, popularly known as ‘Bin Laden notes’, because of its association with money laundering and terror financing.
Its actually happening… !!!
It’s a very bold step taken by Modi Government to fight black money. From now on, Rs. 500 and Rs. 1000 notes will not be used. The Govt. of India has given 50 days to of time to turn them into banks and post offices.
Corruption and black money are diseases rooted in this country, they are obstacles to our success.
According to NDTV Profit report, if we brought 50% of black money back to India then INR can become 58 rupees per dollar.
Notes of Rs. 2000 and Rs. 500 will be circulated soon, as RBI has decided to limit the notes with higher value.
Below are images of new currency. :)
Hope this effort will make some changes in our country’s future.
Atleast from now, all the black money will be left with Rs 0 value.
Let assume there are 5lakh crore worth black money in India. As a result the govt. of India can circulate the new notes worth 5lakh crore in Indian market.
At least the following problems will stop -
1. Black Money
2. Corruption
3. Fake currency
4. Terrorism
#AchcheDin
The demonetisation of 500 and 1000 rupee notes is something the nation has still not been able to digest completely. Many people are pro this change and are also applauding the RBI governor, Urjit Patel for supporting Modi’s decision to drive out black money from the economy.
Here are my views on this topic..
PROS
1. As terrorism was one of the main highlights of this 'Surgical Attack'. This change of currency perfectly helps in eradicating that problem for the time being as it was informed by CBI that there is a printing press in Pakistan which was able to copy Indian currency with "Zero Error".
2. As Raghuram Rajan has said that black money can be turned into white by using smaller channels or by "Dividing" of the money. This will help in availability of money to the people who actually needs it.. For Eg- If a person asks other person to give 70,000 of white money in exchange of 1,00,000 @30% commission as other person may have an income less than 2,50,000 (0-2,50,000 is a slab where exemption is provided, no tax has to be paid plus no enquiry will be made unless you are not crossing that 2,50,000 limit as said by PM Modi).This 30,000 rupees of money will get available to a needy person..
3. Government Revenue will increase with a sharp margin as income that is to be taxable will increase. Those funds will be ultimately used for the benefits of citizens of India only.
4. This can be a major step towards the "Economic Equality" that we talk about and is one of the major concerns of India.
5. There has been incidents reported regarding people throwing 500 and 1000 notes into river ganga or shredding them down and throwing them on the roads. These can be seen as signs that this policy is working on the ground level.
CONS
1. Regarding the division of income by big fishes, this can be seen as one of the major loopholes of this change of currency.
2. A big chunk of money i.e two times the total GDP of India is there in Swiss bank accounts which remains unaffected. 90% of the black money is not affected, so it's a major concern for this demonetisation of 500 and 1000 notes of Indian currency.
3. A lot of cases has been registered where the temples or religious places have been reported to indulge in turning the black money into white as there are no proper investigation schemes for that sector. This can be seen as another loophole.
4. With a major proportion of black money being unaffected, expenditure that has incurred or has been incurring on this conversion of currency is huge.
5. With an introduction of 2000 rupees note, we can expect the inflation to rise as per economic theories..
This is just the critical analysis of this 'Demonetisation of 500 and 1000 currency notes' according to me.
Google images
The government has pulled off arguably the most significant reform measure in its tenure. While this expeditious move to boldly counter the black money and parallel economy threat is likely to have significant repercussions, importantly, this effort will have a visible impact on how the current government's policies are perceived in international circles of economic power. Most of the macroeconomic impact will be felt in the short-term, though there are larger implications in the medium- to long-term. We have tried to answer some of the more immediate questions:
What are some of the short-term impacts?
There will be a disruption in the current liquidity situation as households are likely to get affected by the note exchange terms laid by the government. Though clarity is unfolding on this, commodity transactions and general cash market transactions are likely to feel an immediate impact.
What are some of the short-term impacts?
There will be a disruption in the current liquidity situation as households are likely to get affected by the note exchange terms laid by the government. Though clarity is unfolding on this, commodity transactions and general cash market transactions are likely to feel an immediate impact.
Unorganised sector proceedings, including small trade market activities, will remain volatile in the short-term. Roadside vendors, cab drivers, kirana stores, etc., have already stopped accepting Rs 500 and Rs 1,000 notes. It is important to note that a significant percentage of the Indian workforce is employed in this sector, which is likely to be affected by immediate liquidity issues. Overall, negative impact on disposable income is expected along with likely disruption in the consumption patterns of the general populace.
It is estimated that there will be a negative GDP impact in the current quarter as consumption gets a shock in the immediate term. However, quantum and degree of this impact cannot be ascertained at this time.
It is estimated that there will be a negative GDP impact in the current quarter as consumption gets a shock in the immediate term. However, quantum and degree of this impact cannot be ascertained at this time.
How are the equity markets likely to be affected?
An elevation of uncertainty is always a negative for equity markets. As such, markets have reacted negatively to this latest news though part of this may be attributed to the US election results. Markets will recover in the medium-term as the uncertainty eases out. While there exists a possibility of a broad based decline, there will be some sectors (with linkages to the unorganised economy) that would feel the brunt while some niche technology sectors related to fin-tech and e-commerce could gain. The long-term outlook remains positive.
What could be some of the sectoral impacts?
While sectors with linkages to the unorganised economy are likely to be affected, technology and financial services are expected to gain in the medium to long term. On a sectoral basis, the commodities and agricultural sector, including the market for consumer durables and non-durables is expected to feel the heat. In the short to medium-term, large denomination purchases will likely be made via electronic purchases rather than through brick and mortar outlets. This will impact the retail sector adversely.
The real estate sector is likely to see a significant negative impact in the medium- to long-term, particularly in the repurchase market. There are expectations of a revaluation of current real estate transactions across the board representing possible losses to players in the sector. The luxury goods market is also likely to get affected as this move represents an erosion of real wealth to a large number of people. Areas of sub-sectoral impact will be felt in luxury cars, SUVs, gems, jewellery, gold and high-end branded products.
On the positive side, there is likely to a reset of spending patterns as this move represents indirectly a significant push towards a cashless economy. Businesses in the fin-tech sector, including payment banks, mobile wallets, electronic transfer providers, etc., are expected to see gains.
Positives
E-commerce and Fintech
1) Payment gateways
2) Cards
3) Mobile wallets
4) Online retail
5) Net and payment banks
6) e-marketplace
An elevation of uncertainty is always a negative for equity markets. As such, markets have reacted negatively to this latest news though part of this may be attributed to the US election results. Markets will recover in the medium-term as the uncertainty eases out. While there exists a possibility of a broad based decline, there will be some sectors (with linkages to the unorganised economy) that would feel the brunt while some niche technology sectors related to fin-tech and e-commerce could gain. The long-term outlook remains positive.
What could be some of the sectoral impacts?
While sectors with linkages to the unorganised economy are likely to be affected, technology and financial services are expected to gain in the medium to long term. On a sectoral basis, the commodities and agricultural sector, including the market for consumer durables and non-durables is expected to feel the heat. In the short to medium-term, large denomination purchases will likely be made via electronic purchases rather than through brick and mortar outlets. This will impact the retail sector adversely.
The real estate sector is likely to see a significant negative impact in the medium- to long-term, particularly in the repurchase market. There are expectations of a revaluation of current real estate transactions across the board representing possible losses to players in the sector. The luxury goods market is also likely to get affected as this move represents an erosion of real wealth to a large number of people. Areas of sub-sectoral impact will be felt in luxury cars, SUVs, gems, jewellery, gold and high-end branded products.
On the positive side, there is likely to a reset of spending patterns as this move represents indirectly a significant push towards a cashless economy. Businesses in the fin-tech sector, including payment banks, mobile wallets, electronic transfer providers, etc., are expected to see gains.
Positives
E-commerce and Fintech
1) Payment gateways
2) Cards
3) Mobile wallets
4) Online retail
5) Net and payment banks
6) e-marketplace
Negatives
Agriculture
Luxury goods
Real Estate
Commodities
Traditional Retail
1) Consumer durables
2) Consumer non-durables
Agriculture
Luxury goods
Real Estate
Commodities
Traditional Retail
1) Consumer durables
2) Consumer non-durables
Will exchange rates be affected?
We could see some appreciation of the domestic currency in the forex markets as notes in circulation will decrease. Though the RBI will be monitoring and taking remedial action, negative impact on international trade cannot be ruled out at this point. Counter moves by the government are expected to ease this impact.
We could see some appreciation of the domestic currency in the forex markets as notes in circulation will decrease. Though the RBI will be monitoring and taking remedial action, negative impact on international trade cannot be ruled out at this point. Counter moves by the government are expected to ease this impact.
Will there be an effect on Inflation and what are the policy implications for it?
We are likely to see some decline in inflationary pressures as demand along with household inflation expectations are likely to go down. This would make the RBI more comfortable on managing inflation in the future increasing the possibility of rate cuts in the future.
We are likely to see some decline in inflationary pressures as demand along with household inflation expectations are likely to go down. This would make the RBI more comfortable on managing inflation in the future increasing the possibility of rate cuts in the future.
What are some of the longer-term implications?
This essentially represents a change in regime for the real and financial economy. Domestically, there could be some turmoil as the effect will be disproportionately felt by the lower and upper income classes. Internationally, the government is likely to get a thumbs up for the move and more countries could potentially see this as a viable option to curb black money and stem illegal financial activity.
This essentially represents a change in regime for the real and financial economy. Domestically, there could be some turmoil as the effect will be disproportionately felt by the lower and upper income classes. Internationally, the government is likely to get a thumbs up for the move and more countries could potentially see this as a viable option to curb black money and stem illegal financial activity.
Last, though this move by the government may not be a first, having being tried by earlier governments as a tool to fight corruption. Such an action achieves larger significance for a globally connected India as it shows boldness in tackling an issue which has remained a thorn in the growth success story of this generation.
(The author, Anis Chakravarty, is Lead Economist, Deloitte.)
(The author, Anis Chakravarty, is Lead Economist, Deloitte.)
I personally will recommend this step.
- Reduction in black money. Transaction in black market goes though cash, not through online banking. As for online banking it is very easy to track the source and beneficiary. Black money in higher denomination note is easier to hide & transport it.
- Reduction in Inflation : Bigger transaction will be mostly through CARD or ONLINE. That money will be accounted and pressure on the banks to purchase currency from RBI will be reduced. Shops will be bound to use online method of transaction. Concept of “Change” ie we buy 995 rupees stuff and in return shopkeeper handover us 5 rupees chocolate as change will be gone.
A clever move by Mr. Prime minister Narendra Modi.
It will easy to get black money. Smart move to stop corruption.
Now that old not will be useless. People will exchange them for new ones or deposit them in bank and will get caught. And the people who have tons of black money sitting in their house that will also be useless. Yes, they will try different tricks but they will still loose a lot. I am wondering why no one ever thought of this before.
Here is a link what happen when someone burn a indian rupee note.
After Narendra modi announced the decision to ban ₹500 and ₹1000 notes….One of the Neighbors in my colony said…
Ab kaun IAS ya neta banna chahega…
Is this what has become the definition of serving the people?????
This single statement defined the deep-rooted Corruption in our country…This is a very necessary step towards cleaning India….This is the ultimate step which would become a stepping stone
..This is what he did Today…He banned the ₹500 and ₹1000 notes which would be the milestone for a corruption free India…This is a major step which has stormed the whole nation …
Prime Minister Narendra Modi was elected to take big, transformational decisions. He hasn't exactly been full of such decisions in the past two and half years - but he showed today that he was certainly capable of them.
The decision to ban existing 500- and 1000-rupee notes has a certain economic logic to it. Certainly, the absence of large-denomination notes will make it harder for people to keep black money in hand. That said, there are no clear estimates as to how much black money is in actual currency notes, and how much in land or gold or other forms of wealth.
Now..Coming to the Crucial aspect of this decision….
It is almost impossible for the corrupt leaders and businessmen and officers to keep their black money in large denominations..
Further…Banks will exchange notes only if proper ID is shown to them …
It is a major step towards transforming India…
I BRING TO YOU THE GROUND REPORT…
THIS IS WHAT HAPPENS…
Minutes after the announcement….This was the queue at the petrol pump…
Imagine…This is the Fear…Created by modi…..
This is Modi….
I went to a record 13 shops and none of them agreed to give 5 kg flour (worth 160 rupees) when I gave them a 500 rupee note…..They said they don't have any change…Every one of the 13 storekeepers said this…..
Yes it is the necessity to ban Currency notes of Rs. 1000 and Rs.500 in India.
Currently how the total Indian currency is divided?
1. Rs.100 Notes = 23%
2. Rs.500 notes = 44%
3. Rs.1000 notes = 24%
Notes of 100,500 and1000 Rs. account for 93% of the Total Currency Money.
Fake currency notes are also found only in the currency notes of Rs.500 and Rs. 1000.
As per media reports currently fake currency in circulation in India is more than Rs 1,69,000 to 200,000 Crore
As per media reports currently fake currency in circulation in India is more than Rs 1,69,000 to 200,000 Crore
Please know that Reserve Bank of India has no power to ban the currency notes of 500 and 1000.
Only government of India is allowed to ban the currency notes.
Only government of India got power to ban the currency notes.
Only government of India got power to ban the currency notes.
The central bank only prints currency notes, denominations are decided by the government,"
Government of India Reports says that 70% Indians earn daily Rs.20.
If someone is earning Rs.20 daily then he must be spending Rs.20 daily.
I assume that if any Indian is earning Rs.100 daily then also he can spend daily Rs.100.
What is the meaning per capita income?
What is the definition of Per capita income?
What is the definition of Per capita income?
Per capita income is calculated by evenly dividing the national income among the country's population.
Per capita income – income per person in a population
Per capita income is often used to measure a country's standard of living.
Now Know the Per Capita Income of few countries
1. per capita income of US is 40000$
2. per capita income of UK is 20000£
3. per capita income of Japan is 40,00,000¥
4. Per capita income of India is projected to grow by 17.3 per cent to Rs 54,527 in 2010-11 from Rs 46,492 in the year-ago period. Currently Per capita income of India is Rs.46, 492. Per capita income (at 2004-05 prices) stood at Rs 36,003 in FY 2011 against Rs 33,731 in the previous fiscal, according to the latest data on national income. Official data released on Feb.7 2011.
5. Per capita income of India in US dollars will be $ 1041.6321 as per conversion rate June 8, 2011. INR Rs. 46, 492 = US $ 1041.6321
Divide Per capita income with highest denominator note and you will find the magic number and magic number for US is 400, UK is 400 and Japan is 400 and India is 37.
India needs to get the magic number 400.
Now what is the highest currency denominator in USA, UK and India?
1. USA highest currency denominator is $ 100 and Per capita income is 40000$
2. UK highest currency denominator is 50£ and per capita income is 20000£
3. India Highest currency denominator is Rs. 1000 and per capita income is $ 1041 or INR Rs. 46, 492
Now do you see that ratio of Per capita income and highest denominator currency?
1. USA = 40,000 $ = highest currency note 100$
2. India = 1041 $ = highest currency note is INR Rs 1000 = 22.409 $
When highest denominator note is 100$ what is the per capita income?
Per capita income is 40,000 $
Per capita income is 40,000 $
In other language when per capita income is 40,000$ what should be the highest denominator note?
It is 100$
It is 100$
Now divide 40,000 by 100 it will be 400.
Now what is the per capita income of India it is $ 1041
Then what should be the highest denominator note for India.
Then what should be the highest denominator note for India.
40 000 = 100
1041 =?
1041 =?
The answer is 2.60$ should be the highest denominator note for India.
100 Rs. = US $ 2.24 - As per Conversion rate on June 8, 2011
1041 multiply 100 = 104100
Now divide it with 40,000 it will be 2.60%
Now divide it with 40,000 it will be 2.60%
Now same way if you will find different nations you will come to know that
Their ratio of per capita income to highest denominator currency is 400.
For UK magic number is 400
For Japan magic number is 400.
Their ratio of per capita income to highest denominator currency is 400.
For UK magic number is 400
For Japan magic number is 400.
Not exactly 400 but it will be near to that in every developed country.
Thus India does not need the currency notes of more than Rs.100.
Today in India when we read about corruption amounts and fake currency notes found the number is in Crores always.
Did you ever heard that fake currency notes of 50 and 100 found in Crores of Rs?
Did you ever heard that bribe of Rs.1 Crore given in notes of Rs.50 and 100 notes?
Did you ever heard that bribe of Rs.1 Crore given in notes of Rs.50 and 100 notes?
These t...
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Dont panic.nothing will happen to your money.your 500,1000 rupee is still valid.u can deposit it in your bank account.
1.dont rush to nearby ATMs to deposit your money, because withdrawl limit is reduced to 2000.
2.dont buy gold. as the prices hav drastically increased post demonetisation.
3.keep your money with your self.
4.buy day to day amenities from your nearby grocery shop in account and tell him u will pay him later.mostly they will accept if u are a regular customer.
5.u can give 500 or 1000 rupees in your near by grocery shop at one time.ask them to keep it in your account.u can buy things later and they can deduct it from that.
6.grocery shop owners please accept 500 and 1000 rupees.becoz it is ur biggest chance.accept money in full or account it.give back the consumers only in terms of goods and not as money.this will improve your business.
7.small and big industry owners please buy and distribute groceries to your employees. U can deduct it from their salary this month.this act can earn you a lot of good and sincere employees.
Good day.
Plz wait .we will get some more standing instructions from the government .
First thing they didn't ban ₹500,₹1000.They just change the note so,the corruption will be start from 0.if the corrupt money stored as 500s, 1000s.I ts like if couldn't correct my drawing I tear the pages & start in fresh page.
Around 44% 500s,24%1000s.These have to change immediately.why can't they reduce the 500s,1000s before itself into 100s and reduce the 500s,1000s.
Still In many places they don't submit original earnings even In marriage halls they won't give receipts. So, ultimetly they can cheat.
Government said they can change the money in banks & some places…with ID proof or PAN so why they have to ban immediately.they can give some time.anyway those who change the money can be recorded so what is the need to ban so urgently.
Even they make the move unless corrupt politicians and officials and people change there won't be any change.
They announced in a working day at an untime which makes difficult for common people. What could gone bad if they announce on Saturday,which makes Sunday as well as holiday.which makes somewhat good as expecting holiday next day.
Suppose Mr. Black has shit load of illegal money (let's say Rs. 10 crore). He definately can't deposit such a huge amount in a local bank as banks ask for a valid source of this income.
So he decides to hide his income in his own closet. Now, there's a problem. The money involved is too huge to hide, so what he does is he converts all of this amount to 500 and 1000 denomination bills (usually it's 1000), thus reducing the number of bills to hide.
Now what the MODI'fied govt. has done is they have banned all 500 and 1000 denomination bills.
Mr. Black is now tense as he needs to exchange/deposit such a huge amount from/in his bank, so as to prevent his black money from becoming nothing but scrap.
He can't exchange such a huge amount of money all at once. So what he does? He tries to exchange it by parts. But Modi is cute and smart. There is a limit on exchange amount which will make exchanges of huge amounts by parts impossible or highly risky. (More frequent exchanges will make the bank suspicious too).
Same goes with deposit. Depositing huge amount again raises a question on source of income.
So ultimately most of the black money will become nothing but scrap.
Now what if Mr. Black makes shit load of money again next year and learns from his past mistake? To tackle this situation this cute and smart Modi sarkaar has GPS microchips embedded in Rs. 2000 bills. Refer this for more information.
So basically, black money will drastically reduce if 500 and 1000 denomination bills are banned.
A normal person who earned his money by legal means would have no worries as he can easily exchange or deposit the same before the said deadline with proofs.
Mr. Black seems ready to tackle the winter chills :)
Certainly a welcome move to curb black money. Actually, even a child knows that this act will bring out all the unaccounted money and prevents money laundering. But the actual thing is that the introduction of new currency notes with Nano GPS chip.
The RBI has not made any announcement as yet regarding the nano GPS chips being available in the Rs 2,000 note. However, there is a possibility of the same becoming a reality.
What is so special about these currencies ??
The Rs 2000 currency is designed keeping in mind to eradicate the black money issues using state of the art indigenous nano technology, every Rs. 2000 currency note is embedded with a *NGC (Nano GPS Chip)*
How the embeded NGC Technology Works?
The unique feature of the NGC is it dosent need any power source. It only acts as a signal reflector. When a Satellite sends a signal requesting location the NGC reflects back the signal from the location, giving precise location coordinates, and the serial number of the currency back to the satellite, this way every NGC embedded currency can be easily tracked & located even if it is kept 120 meters below ground level. The NGC cant be tampered with or removed without damaging the currency note
How will this help eradicate black money menace?
Since every NGC embeded currency can be tracked. The satellite can identify the exact amount of money stored at a certain location. If a relatively high concentration of currency is found a certain location for a longer period of time at suspicious locations other than banks & other financial institutions. The information will be passed on to the Income Tax Department for further investigation
Just a beginning of the end of black money in India
Salute to our PM..!!
Bold move indeed.!!
In his address to the nation on Tuesday, Prime Minister Narendra Modi announced that currency notes in Rs 500 and Rs 1,000 denomination will be withdrawn from midnight. From 9th November onwards the existing Rs 500 and Rs 1000 will remain as a piece of paper with no importance. The step has been taken to check black money, he added.
The RBI will issue new Rs 500 and Rs 2,000 notes.
New Rs 500 note.
New Rs 2000 note.
Here's what PM Modi said on Tuesday 8th November:
- Old notes will not be legal tender from midnight tonight, Modi said, adding those who earned money by legal means would remain protected.
- From November 10 to December 30 old notes can be deposited in banks.
- Old notes can be converted through banks at limit of Rs 10,000 per day. The limit will be Rs 20, 000 per week. Limit on ATM withdrawal will be Rs 2,000.
- Old notes can be converted through banks post office and sub-post office.
- On humanitarian grounds, old notes will be accepted in hospitals for 72 hours till November 11.
- Airlines, Railways and Roadways will accept for 72 hours old notes till November 11.
- Many essential facilities, including crematoriums, will accept old notes till November 11.
- We are committed to empowerment of the poor while following Sabka Saath Sabka Vikas
- Several schemes are tailored towards this objective
- Corruption and black money has taken deep roots in the country
- In global ranking we are rated high in corruption index.
- Some specific classes are behind it. Some used high position.
- At the same time many honest people are working diligently. We read reports of honest auto or taxi drivers returning valuables of customers.
- Corruption and terrorism are pushing the country behind.
- Counterfeit notes are being pushed from across our borders to finance terror activities.
- We have taken steps to check such activities and seized fake notes.
- Have entered into pacts to check black money through the exchange of information.
- Several measures led to unearthing of 1.25 lakh crores of black money
Dude, you have so much anxiety and enthusiasm. You should wait for Modi to complete his speech atleast before you write this question. It is one of the bold and best decision taken by government of India. Today Indian economy's major problem is black money entering from Nepal, Bangladesh and Pakistan. Government discontinued 500 and 1000 denominations and announced to launch new 500 and 2000 denominations.
- Everyone will dig out there buried cash now.
- Most of them will go online now.
Modi is smart i must say. He first encouraged everyone to have a bank account, now forcing everyone to submit their cash (most of it). Pure genius.
Edit :
Summary of the important announcement :
1. ATM's wouldn't wouldn't work on 9th and 10th November. Rather the withdrawal limit is Rs. 2000 only.
2. All Residents have option till 30th December 2016, to deposit their existing cash balance of 500 and 1000 rupees in their bank accounts.
3. ATM withdrawal is limited post 11th Nov to 10000 per day, but initial few days it would be 2000 Rs. Only.
4. Emergency periods like hospitals and chemist, train ticket booking and airline ticket booking, petrol pumps may accept the old notes to 11th November.
5. No changes in online, card, cheque or any other plastic money transactions.
6. 9th November, banks wouldn't be available for public banking services.
7. New notes of 500 rupees and 2000 rupees would bring in circulation, mostly from 31st March 2017.
*RBI to issue ₹2000 Rupees Notes coming February 2017*
The Rs 2000 currency is designed keeping in mind to eradicate the black money issues using state of the art indigenous nano technology, every Rs. 2000 currency note is embedded with a *NGC (Nano GPS Chip)*
*How the embeded NGC Technology Works?*
The unique feature of the NGC is it dosent need any power source. It only acts as a signal reflector. When a Satellite sends a signal requesting location the NGC reflects back the signal from the location, giving precise location coordinates, and the serial number of the currency back to the satellite, this way every NGC embedded currency can be easily tracked & located even if it is kept 120 meters below ground level. The NGC cant be tampered with or removed without damaging the currency note
*How will this help eradicate black money menace?*
Since every NGC embeded currency can be tracked. The satellite can identify the exact amount of money stored at a certain location. If a relatively high concentration of currency is found a certain location for a longer period of time at suspicious locations other than banks & other financial institutions. The information will be passed on to the Income Tax Department for further
If you would ask me the effects of discontinuing such big denominations isnt any less than the crisis in USA after 9/11.
After 9/11, the first problem that was put forth before the banks was to continue the flow of cash. Their responsibility was to provide the money to anyone who might need it .
Now coming to the our own 9/11, rendering 500 and 1000 obsoelete created a much worse cash flow problem. Right now I am almost out of all small denominations. So the first thing tomorrow is people will try to get hands on every sub 500 denomination they can get. This thing created such a thinking in our brain that maybe tomorrow you auto rickshaw driver will deny to break your 100 or ask for exactly 445 instead of accepting 500.
So some problems that might hit tomorrow
- Many rich people arent that full of 100s or 50s and not everyone accepts your paytm or credit card.
- Business will be down for a small time as people wont really want to buy a refrigerator with 3 stashes of 100s rather than one small stash of 1000.
- The limit on cash withdrawals and exchange doesnt suffice the needs. 2000 is very low as you might have a lot to buy. Similarly if the shopkeeper in the above situation accepts that 1000s then he is done for the week as he cant exchange more than that. (I might need a fact check on the exchange limit)
- There is also one more thing. So for the people who have loads of 100s might hoard them and exchange for say 9 notes for 1000 rupee. That kind of thing shouldn’t surprise you.
But eventually things will flatten out after a week as people will start their e-cash. I dont think that the availability of android phones and JIO free data can’t really help your e-cash transactions. If even something the situation is quite similar to Mr. Robot’s 5/9.
But its really a commendable job by government. It will hinder all the cash based black money in India. For the people who thinks that a lot of black money is in Swiss accounts have just assumed only the fat rich corporates have black money. Their time will also come. But a surprise move will cut the black money hoarding. And it will really be a show to see what steps government will take to cut black money in new notes (NGC is a rumour). However if anyone doubts it should also think that the new notes rollout will be more accounted and till Feb hoarder’s waters might dry.
To all those people who are spreading a rumour that NGC tech will keep the money accounted should also know that a satellite cant triangulate a note beyond 10s of meters. It cant really tell the amount of cash. And most importantly, it isnt cost effective
At the stroke of midnight hour, the corrupt became the bankrupt. Yes, the die is cast and we will see the consequences of it from now. There are even challenges ahead for this decision to be consider successful
- You are printing new money to replace old ones. There are certain printing costs involved to generate and distribute this money to every bank in the country. The amount of black money to collect or reduce to dust now will play a major role here, as this total amount has to be more than printing and distribution cost.
- General public will have less money as this will affect the general transaction and further affecting the GDP of country. This trend will continue till the limit on transaction and easy flow of new notes in country.
- Possibility of having fake currency to public. Ability to backtrace and identifying the source of currency type mechanism is not there. As the innocent might lose all his money and get caught in fraud.
- How effective the new system of notes are? It would be groundbreaking if these notes will be impossible to tamper with
Originally Answered: What happen when Rs.1000 and Rs.500 notes are withdrawn from India?
There will be numerous benefits such as -
- First thing that will immediately stop is - Hoarding of black money, as people holding such black money will be forced to put that into the system or change it into other denominations,Thus huge amount of money will come back into the economy.
- Second thing that will change is Generation of black money will stop or decrease to a large extent. As one can not do large transactions in smaller notes and using Rs.50 or 100 notes in all dubious real estate and gold assets will become almost impossible.
- Third , National Security will be better as financing terror through smuggling currency and money laundering can be controlled. Like Europe recently decided to abolish Euro 500 note due to its illicit use.
- Buying votes in election will become difficult. As well all know that currency circulation reaches its peak during big elections and local politicians at many places try to buy Votes putting Democracy at stake. This will become difficult and we will see much fair elections then what we see now.
You're celebrating the nullification of Rs. 500 & Rs. 1000 notes?
Most of India runs on cash. Millions of businesses run on cash. Most of these are small businesses. They cannot transact anymore. Their liquidity has come down to zero. You're celebrating the nullification of Rs. 500 & Rs. 1000 notes?
Most of India runs on cash. Millions of businesses run on cash. Most of these are small businesses. They cannot transact anymore. Their liquidity has come down to zero. The bank is closed tomorrow. They have 50 days in a nation of 1.3 billion to exchange these nullified notes. Do you think they're celebrating?
Yeah, great policy hurrrr hurrr.. But execution? It's an unforeseen ruling with inadequate executionary planning or infrastructure capacity to support it. You're celebrating because only one side of the picture is being presented to you - "End to black money wooo!"
But ask someone in isolation in the country, ask a tradesman in a gully of Zaveri Bazaar in Bombay, your local sabziwaalah who doesn't have a bank account, ask farmers/the rural sector who have saved up in cash in their homes who won't know how to account or deal for the money because of asymmetric financial literacy. And let's not even jump to the implications of shredding millions of notes and printing new ones altogether or the cost attached to recycling itself. Pfft.
For once, forego this privileged opinion and be more compassionate before singularly celebrating.
P.S. how much of this money is actually in currency notes? How much in land and how much in gold? Think.
Also, isn't it problematic to print notes just like that?
P.P.S. Months to declare your black money? Great, yes, I am aware. But an overnight notification to unsuspecting citizens with white money that nullifies it? Hmmm. Popular movements and the ignorance of the marginalized.They have 50 days in a nation of 1.3 billion to exchange these nullified notes. Do you think they're celebrating?
Yeah, great policy hurrrr hurrr.. But execution? It's an unforeseen ruling with inadequate executionary planning or infrastructure capacity to support it. You're celebrating because only one side of the picture is being presented to you - "End to black money wooo!"
But ask someone in isolation in the country, ask a tradesman in a gully of Zaveri Bazaar in Bombay, your local sabziwaalah who doesn't have a bank account, ask farmers/the rural sector who have saved up in cash in their homes who won't know how to account or deal for the money because of asymmetric financial literacy. And let's not even jump to the implications of shredding millions of notes and printing new ones altogether or the cost attached to recycling itself. Pfft.
For once, forego this privileged opinion and be more compassionate before singularly celebrating.
P.S. how much of this money is actually in currency notes? How much in land and how much in gold? Think.
Also, isn't it problematic to print notes just like that?
P.P.S. Months to declare your black money? Great, yes, I am aware. But an overnight notification to unsuspecting citizens with white money that nullifies it? Hmmm. Popular movements and the ignorance of the marginalized.
Initially there will be heavy deflation as people who have earned money through illegal means such as smuggling thankyou so much.
ReplyDelete₹500/1000 Notes Discontinued!