Voice from the Rooftop

Blog of Vincent Augustine D'Souza

Black money and notes

In USA, 8 November 2016 was Election Day. Indian channels were interested in the election and in the evening there were discussions about elections. I put on RT at 8.08 a.m. At 8.40 p.m. I switched to India Today. It was a surprise to see Modi talking. Greater surprise was to hear about demonetisation of 500 and 1,000 rupee notes. Banks and ATMs are closed on 9 November 2016. People can exchange notes from 10 November 2016 to 30 December 2016 in banks and post offices. There will be new 500 and 2,000 rupee notes. The move is to take black money out of circulation.
Modi’s announcement changed the course of discussion on Indian news TV channels. Panelists who were to discuss American election were out of work unless they could speak on black money. TV channels went to politicians, economists and industrialists for their reaction.
Modi’s move is like curate’s egg, good in parts. The decision to do away with 500 rupee notes was a good one. It is cancelled by new 500 rupees notes. The decision to do away with 500 rupee notes was a good one. It is made worse by having 2,000 rupee notes now and 1,000 rupee notes at a later date.
RBI Governor Urjit Patel said “Notably, in recent years, fake Indian currency notes in high denominations – Rs 500 and Rs 1,000 notes – has been increasing. The government has also observed the misuse of genuine high denomination notes in terror financing and also holding black money.”
Counterfeiting is easy with computers, colour copiers, and scanners. It is just a matter of time before black money is held in new 500, 1,000, and 2,000 rupee notes.
BJP’s opponents, some of them Congress members, have said this move will not change much. Most black money is held in participatory notes, real estate, gold and jewellery. Congress did not end participatory notes when it was in power.
Best thing is to stop printing 500, 1,000 and 2,000 rupees notes. When they are soiled exchange them with 100 rupee notes. Corruption is the main reason for black money. Tax evasion is another. Ending corruption will put an end to black money to a great extent and tackling tax evasion will put an end to black money to some extent. Some taxes have to be lowered or abolished.
In January 1978 Janata government had demonetised 1,000 and 10,000 rupee notes. There was a cartoon. A beggar says to a person who has moved away “Take back this 10,000 rupee note and give me 10 paise.”

Updated: November 10, 2016 — 7:46 am

2 Comments

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  1. P Notes has been a big debating point at the time when P Chidambram was the finance minister. After mulling over much the UPA govt too had back tracked on its decision to scrap it. It perhaps gets India huge investment in stock market from overseas investors. Besides it is a legitimate instrument used the world over.

    The PMs move to curb fake currency circulation and black money hoarding is commendable. Need to see what will be the checks and balances for high denomination currency notes that will be released later.

  2. The politicians and the godmen cannot be cleansed ever. So let’s cleanse the currency :)

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