PM Modi steps up with a historical move to restrict black-money

However, some analysts also felt that too many chances to the black money hoarders may demotivate the honest taxpayer.

                                                  Rs 500 and Rs 1000 notes turn to mere paper  pieces overnight

New Delhi, Nov 9:  After PM Narendra Modi’s announcement of ban on Rs 500 note and Rs 1000, calling it as a game-changer, society is spread with shock and curiosity over the action.

And it is needless to say such a brave action is unprecedented in the Indian history. The momentous changes made by Modi-led centre on Tuesday night has turned the highest denominations in your pocket just in to the mere pieces of  paper overnight.

Checkmating the black-money  and counterfeit note  holders

In a surprise appear on the national television channel,  The PM announced that Rs 500 and Rs 1000 is no more a legal tender from the  midnight of  November 8 in order to pull out black-money holders and counterfeit money holders. And this decision has turned  to be a biggest nightmare to them.

The tax evaded cash stocked in the lockers and other  secret places  have simply turned to mere pieces of paper.

Moreover, the PM came up with the announcement at 8 pm on November 8 giving no chance even to convert that money to gold as  many of the jewellery shops starts closing their business by 9 pm.

The decision is also an attempt by Modi to fulfill his election promise of curbing tax evasion and recovering illegally stashed incomes overseas. It gives his Bharatiya Janata Party a talking point ahead of elections in five states next year.

It has been months the Intelligence Departments are constantly reporting the inflow  of counterfeit notes from the borders of Kashmir for funding the terrorism activities. According to Reserve Bank of India Governor Urijit Patel, these circulated counterfeit notes are completely  duplicating the original ones. “It has  really become  tough  to identify the  original ones when circulated  in the market.  And this has prompted government to take such a  historical step,” said Governor while addressing the media shortly after PM’s address to the nation.

“Terrorism is a frightening thing … But have you ever thought about how these terrorists get their money? Enemies from across the border have run their operations using fake currency notes,” he said, referring to a euphemism many Indian leaders use to describe Pakistan.

There is no doubt that the step is well –curated with brains of financial experts. The PM initially comes up  with ‘Jan Dhan Yojana’ urging every citizen to get a bank account and get into the banking sector.

Think at Macro-level aspect

The short notice too sparked concern among people, and large queues were reported outside ATMs across India, as people rushed to withdraw smaller bank notes. The move could also inconvenience poor people and families planning weddings, the season for which starts in days.

However the move could help bring billions of dollars-worth of unaccounted for cash back into the economy, and choke the flow of fake high-value banknotes militant groups use to fund their attacks against India.

The decision is also an attempt by Modi to fulfill his election promise of curbing tax evasion and recovering illegally stashed incomes overseas. It gives his Bharatiya Janata Party a talking point ahead of elections in five states next year.

But the move entails possible downside risks. Given that about 40% of India’s economy is driven by small- and medium-sized enterprises that largely run on cash transactions, the decision could have a knock-on effect on economic growth.

It wasn’t immediately clear how businesses and private banks with large stocks of high-value notes will deal with the transition. The banned denominations account for more than 80% of all currency in circulation by value.

“Banks will be closed on November 9. It will cause some hardship to you….Let us ignore these hardship… In a country’s history there come some moments when every person feels he too should be a part of it,” the prime minister said in a 4-minute speech.

“We have an opportunity when every citizen can join this mega mission,” he added, calling the move an “Imandari ka Utsav”, or celebration of honesty.

Mahatma Gandhi Notes unveiled

The RBI in a press conference on Tuesday unveiled the design for the new Rs 2000 and Rs 500 notes. This series of bank notes will be called ‘Mahatma Gandhi bank notes’.

Economic affairs secretary Shaktikanta Das said more denominations will be unveiled soon when asked whether new designs of Rs 1000 notes will also be introduced.

Highlights of PM’s address

Some important decisions and some serious issues to share.

  • 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.
  • 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.
  • Our measures to check black money are paying off. A voluntary disclosure scheme for undeclared money saw a good response. A Special Investigating Team is making progress to identify who has sent money abroad.
  • 25 lakh crores of black money has been recovered.
  • We need to take a new solid step to fight black money. From now on, Rs. 500 and Rs. 1000 notes will not be used. Have 50 days to turn them into banks and post offices.
  • On November 9 and in some places on November 10, ATMs will not work.
  • Respite for people for the initial 72 hours, government hospitals will accept old Rs. 500 and 1000 notes till 11 November midnight.
  • Petrol pumps and retail outlets will have to keep every single entry of cash transaction with 500 and 1000 notes till November 11.
  • Crematoriums and cemeteries will also be allowed to transact 500 and 1000 notes till November 11.
  • There will be no change in any other form of currency exchange be it cheque, DD, payment via credit or debit cards etc.
  • Those unable to deposit Rs. 1000, Rs. 500 notes by December 30 for some reason, can change them till March 31, 2017 by furnishing ID proof.
  • Notes of Rs. 2000 and Rs. 500 will be circulated soon, RBI has decided to limit the notes with higher value
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