The Big Ban

On 26th May 2014, Mr. Narendra Modi took oath as the prime minister of India and promised public to take serious action against the black money problem and to curb corruption issue, Indian economy has been facing since many years. After returning the favor to Pakistan through surgical strike, now the Prime Minister performs another surgical strike on the people who hold black money and the people who circulated fake currency in the Indian Economy. 

From 9th November 2016 the Indian government has decided to abolish usage of ₹500 and ₹1000 currency notes. This has a mixed reaction amongst the public of the country many are supporting it and many are confused on how drastic the move has come. There are some serious questions to be answered like, does the plan of government once all the currency notes have been withdrawn such as when will the new currency notes be arriving at the market so that there's no shortage of currency notes in the market, What are the reasons behind such a drastic move?

One advantage of this decision is, it will help the government to fight black money, corruption, terrorism and counterfeit currency with one single decision.

The RBI is unearthing the black money by denying legal tender status. Now if somebody has cash in hand that has not yet been disclosed will face serious issues as the currency notes have no value in the money market. This will also help in digging out the black money from the Indian economy. Another aspect can be considered is the fake currency presence in the Indian economy. Due to this move all the fake currencies would be detected and removed from the Indian economy.

With new limit on ATM withdrawal being restricted to ₹2000/- per day, withdrawal from the bank accounts limited to ₹10000 a day and ₹20000 a week. It will drive the card payments across the country, in simpler words card transaction will slowly replace cash transactions and daily activities that will help and highlighting every transaction and individual makes and will lessen the scope of hiding money.

Looking into the economic aspects of this decision, its implementation would lead in reduction of black money in the Indian economy which would in turn result in lowering the price of various goods and services ultimately. Such decision is good for the financial health of an economy as they will be part of white money and more of taxes that would be collected so more of revenue for the government to operate and this would in turn provide more money for government to invest in various sectors that would increase the size of economy by providing jobs, investing in technology, defense and various other sectors. Increase in the purchasing power amongst the people will level up the standard of living.

-Vaibhav Singh Rathore
(Department of Finance Management)