India encountered a monetary shock when, on the evening of November 8, 2016, Prime Minister Modi suddenly announced the scrapping of all ₨ 500 and ₨ 1000 notes across the country by midnight. These notes will be replaced by newly issued ₨ 500 and ₨ 2000 notes, which people can receive in exchange of their old notes at banks and post offices over the next 50 days. All banks and ATMs were closed on November 9, and the amounts thereafter exchanged for new notes by showing ID cards will be monitored closely by banks.
Prime Impetus behind this Enormous Step
The prime impetus behind this enormous step is to sweep off illegal holding of cash in India, a problem that has long persisted and ails the nation like an epidemic. A significant proportion of the challenges currently faced by India, including poverty, can be traced back to corruption, and thus black money. The unanswered question, however, is whether it comes as a good or a bad surprise to citizens.
Here’s some relevant information with brief analysis that you may have been seeking-
The Element of Surprise
Not a single news channel had word about the upcoming announcement. Thus, the short notice under which people had a chance to be prepared with cash for transacting in the coming few days has so far been taken as a mild inconvenience by most people. This unexpected step, however, will certainly steal away from holders of cash that is unaccounted for the opportunity to get rid of scrapped notes. All the hidden, illegally held money will either surface to the government along with its owners, or become waste.
Depositing and Withdrawal until 30th December
It has been clearly stated by the government that while there will be no limit on depositing money in banks, withdrawals will be limited to ₨ 10,000 in a day and ₨ 20,000 in a week. This smart move will ensure that illegally held cash is caught during withdrawals, and the “black money” will automatically remain with the bank. One of the foreseen consequences is flooding of banks with money. When ATMs are finally activated after the 10th of November, the maximum withdrawal limit will remain ₨ 2,000 per card for the first few days, and ₨ 4,000 thereafter.
Well, news in this event is not just about the introduction of new notes. The technology used in designing new ₨ 2,000 notes will enable visually challenged individuals to identify denominations. Several eccentricities will make the newly issued bank notes very hard to be faked. Some of these eccentricities that can help you identify real notes from fake ones are:
• Position of Mahatma Gandhi’s image
• Position of the thread
• Font size of the serial number
• Key design elements
Modi Keeping his Promises
When Mr. Narendra Modi joined the office as Prime Minister in 2014, his government promised the accumulation of billions of dollars of black money, and its introduction into the legal financial system. Halfway through his term, Modi has taken this unprecedented step, and this is ample proof of his dedication towards being true to his words. Not only is this a very smart move, but also a courageous one. A good proportion of voters who elected Modi’s government were small traders who carry out most of their business in cash. These traders store cash worth lakhs of rupees at home, and will face issues when they turn up at a post office or bank to exchange large sums of money. The short term economy of the country has, therefore, been rendered absolutely unpredictable.