In one of the boldest decisions that Indian Government has taken since a long time, Government has discontinued 500 and 1000 currency notes. While the idea itself seems chaotic, it is going to unleash mayhem in the coming days. People have 50 days to turn up to the bank and get due value for their 500 and 1000 currency notes, after which these would be nothing but a piece of paper worth not more than 10 paisa. Howsoever long this period of 50 days may seem, given the population of county, I am sure I cannot tell the difference between banks and queue for tatkal train tickets till 30th December 2016. This coupled with unannounced bank holiday, cash withdrawal limits, dysfunctional ATMs and Cash Deposit Machines has clearly messed up with so many lives today. Suppose you had ordered a mobile worth Rs 15000 to be paid via cash on delivery. How do you pay for it? Not all the courier guys carry the card swipe machine with them. This instance, ofcource ,is not critical, but there can be gazillions of super urgent errands to be done today. What if there was some marriage scheduled today and groom’s father had withdrawn money. Now he can neither withdraw money, nor does his money hold any value. There is a silver lining to this story. Firstly, these currencies will be accepted at hospitals, petrol pumps and for train and flight tickets. This clearly makes sure that people are not stuck in transit while traveling or while flipping from life to death. Secondly, if people were informed earlier, they could have made prior arrangements. But at the same time all the black money hoarders would have got time to disburse their amassed wealth. Having said that, we can not ignore the fact that most of the unaccounted money is either invested in properties or in commodity like gold. This chunk of unaccounted money is off the net. While we have conquered the tip of the iceberg, we should also test the depth of water.
Announcement that these currency notes would cease to be the legal tender was timed to perfection. Firstly, it was announced in the evening after the banking hours with the circular coming into effect since midnight. Hence, all people could do was do some petty shopping. Secondly, we must not forget that this is just a week after Diwali. There are so many traders who mint money during the festive season. Majority of them don’t pay the tax. This money would not have been invested yet. Now all these currency notes would either come to the bank and would be taxed or would be used to carry peanuts. Thirdly, this has closely followed the voluntary income disclosure scheme by the Government. Hence, Government is well within its rights to heavily penalize any individual with unaccounted cash flow into his bank account.
Apart from black money, this move will also curb the menace of counterfeit notes. From my personal experience, I can tell you that it hurts a lot when the crocked person at the bank counter tears apart your 3 currency notes which you thought were of Rs 1000 each. Critics might say that with the new notes, we will get new counterfeits. It is hard to rule that out but this move has surely put a hold to this dubious business for once. All the counterfeit notes in the market have been rendered useless. Also, all the machinery used and the channels have come to a standstill. It would take some time for this machinery to rise up and it’s always easier to nip these in the bud.
The point that I want to drive home is that this was a necessary evil. While in short term, it might create chaos, its long term benefits can be immense. At present, our focus should be to implement this as seamlessly as possible to minimize the chaos. Also, let’s get ready to welcome new 500 and 2000 notes that are expected to be our weekend buddies.