“Everyone will adjust. And while it can hurt some small businesses and individuals, it is better to do it than not.”–Mauro Guilin
By Maryam Khan
The ‘demon’ in demonetization is in the beginning. The demonetisation of ₹500 ($7.40) and ₹1000 banknotes was a step taken by the Government of India on 8 November 2016, ceasing the usage of all ₹500 and ₹1000 banknotes issued by the Reserve bank of India till November 8, 2016.
On 28 October 2016 the total banknotes in circulation in India was ₹17.77 lakh crore (US$260 billion).In terms of value, the annual report of Reserve Bank of India of 31 March 2016 stated that total bank notes in circulation valued to ₹16.42 lakh crore (US$240 billion) of which nearly 86% (around ₹14.18 lakh crore (US$210 billion)) was ₹500 and ₹1000 banknotes. In terms of volume, the Reserve Bank of India report stated that 24% (around 22.03 billion) of the total 90266 million banknotes were in circulation.
The aim behind the government’s action was to combat tax cheating, counterfeiting and corruption. For years, this country has felt that corruption, black money and terrorism are festering sores, holding us back in the race towards development.
Similar demonetisation of banknote denominations has been taken in the past.
₹ 1,000 and higher denomination notes were first demonetized in January 1946 and again in 1978.
The highest denomination note ever printed by the Reserve Bank of India was ₹10,000 note in 1938 and again in 1954. But these notes were demonetized in January 1946 and again in January 1978.
₹1,000 and ₹10,000 bank notes were in circulation before January 1946. Higher denomination banknotes of ₹1,000, ₹5,000 and ₹10,000 were reintroduced in 1954 and all of them were demonetized in January 1978.
The ₹ 1,000 note made a comeback in November 2000 and ₹500 note came into circulation in October 1987.
This is the first time that ₹2,000 currency note is being introduced in the country. The banknotes issued during this period contained the symbols representing science and technology, progress and orientation to Indian art.
Bank notes in Ashoka Pillar watermark series in ₹10 denomination were issued between 1967 and 1992, ₹20 in 1972 and 1975, ₹50 in 1975 and 1981 and ₹100 between 1967-1979.
In October 1987, ₹500 banknote was introduced with the portrait of Mahatma Gandhi and Ashoka Pillar watermark. Mahatma Gandhi (MG) series banknotes – 1996 were issued in the denominations of ₹5, (introduced in November 2001), ₹10 (June 1996), ₹20 (August 2001), ₹50 (March 1997), ₹100 (June 1996), ₹ 500 (October 1997) and ₹1,000 (November 2000).
The Mahatma Gandhi Series – 2005 bank notes were issued in the denomination of ₹10, ₹20, ₹50, ₹100, ₹500 and ₹1,000 and contained some new security features as compared to the 1996 MG series.
The ₹50 and ₹100 banknotes were issued in August 2005, followed by ₹500 and ₹1,000 denominations in October 2005 and ₹10 and ₹20 in April 2006 and August 2006, respectively
If government was very serious to demonetize the bigger currency to curb black money, terrorist activities etc ad provoked by government itself then why didn’t government try to provide adequate liquidity of smaller currency in market first? Why the government was in do hustle to impose ‘financial emergency’ in the name of demonetization? Just for the sake of upcoming assembly elections? It is not demonetization but it is to strengthen themselves economically and curb other political parties because first hand results shows that BJP settles its own black money as WB BJP account received 3 crore rupees prior to this episode.
Present government is saying that decision of demonetization was secretly planned but there are so many videos, news in the market which proves that it is a another Jumla. In 2005 UPA government releases new and updated currency to curb money laundering and fake currency and without making the sound noise they changed the old one and market was flooded with new high security currencies. Since 2005 black money, fake currency etc are in decline mood.
If present government wants to make the so called demonetization hustle free then can do it without shouting (but this government is working on the philosophy to insert its idea in the mind of each and every single person). For this govt have to issue a circular secretly to all financial/banking authority to collect every currency when any one deposits and handover the smaller nominations to those who withdrawal money and same rule is also applicable for ATMs too. Government should advised them to not to feed bigger currency in ATM machines and by this simple method govt recollect it’s bigger currency and once market gets adequate liquidity of smaller currency govt can go ahead with demonetization scheme.
In India, the strongest system is the society, which moves only on cash for its daily needs and even for hospitalisation. Thus with cash in hand you can bargain. Then comes the political system supported by bureaucrats, judiciary, police and taxation system in various forms. Then comes earning system like agriculture, industry, export etc. Afterwards we have educational system, hospital system, military etc. Over the years, political system has corrupted each and every system and without changing any other system, how can you expect just one system to change India? In the past few days, millions have stood in lines, who will pay for the time loss ,money loss in terms of man hours? While standing for hours in lines, who will pay for the health deterioration suffered by the people? The politicians take it for granted that they have the right to play with the lives of the people, millions have already used black money for their own purpose and others have converted into white money. Private sector is in smart hands and people know how to befool each and every system.
The money lying at home, now will be counted as the black money, while it is the hard earned money kept by the people at home to run the life. If someone was really keen to change India, they should have introduced plastic money on a regular basis for people to shed cash in hand. Secondly, honesty has to be introduced, which does not exist.
Will It Work?
“Black money is not synonymous with corruption; it is one of the symptoms of corruption,” said by Rajesh Chakrabarti (Professor and Executive Vice Dean of the Jindal Global Business School at Jindal Global University). The Indian reality, adds Chakrabarti, is that many trades and areas are still cash-based and “cannot be digitized just by willing it.”
Better Progress For Modi, this is work in progress.
A law was passed in 2015 for disclosure of foreign black money. Agreements with many countries, including the U.S., have been made to add provisions for sharing banking information with the bank.
A law has come into force from August 2016 to curb benami transactions, or the purchase of property and deals using fictitious names — a way of deploying black money earned through corruption.
A scheme was introduced for declaring black money after paying a stiff penalty. And arching over it all was the Prime Minister’s Jan Dhan Yojana, which aimed at financial inclusion for the whole country. Launched in August 2014, it has managed to add 250 million bank accounts through November 2016. Demonetization, then, was inevitable.
[ Maryam Khan, HR professional & Personnel Management Student ]