Last week, the Prime Minister of India, in a historical turn of events, announced that the 500 and 1000 rupee notes, would no longer be valid for use. This demonetization took effect from that very Tuesday and was seen by many as the most radical economic reform, of the BJP government in a speech by the Prime Minister the very same evening. Once the decision became public, all the social networking sites were abuzz with everyone, expressing their views of the kind of change this would usher into the society. While there were a select few, who believed this was just a way to fan away the public’s attention from major issues, by putting their financial status into jeopardy; most of the public heavily supported this move, both on social media and print media. The idea behind this decision, was the pressing need of removal of corruption in the society. By giving no prior notice, the government was instrumental in striking the proverbial iron, right when it was the hottest.
While there were plans, already in action for the redressal of any problems the general public would face, this move is bound to have some real impact on the economy of the country. Statistics state that India has a black market economy, which is valued over Rs.30 lakh crore, which makes up to 20% of the country’s total GDP. This move was primarily aimed at eradication of all the black money that existed, hence giving a prior notice would have been useless as the black money would have been circulated elsewhere in that time. Now, the situation is such that those who possess black money are left with two options, either to declare it as their income, or to burn the illegal stash. If they so declare their money, there would be a lot of investigations which would then result in them, having to pay about 60% tax and additional penalty on the same, if it is found to be previous undisclosed income. Even if they do declare it as their income, they would have to pay tax at the current rates. This is taking effect in the right way and hence those people, who did hoard black money, find themselves in hot soup.
Reports state that India has lost close to $344 billion in illegal money outflows in the period of time between 2002 and 2011. There were even reports stating that militants working the terrorism circuits, were also using these very illegal notes to get access into India. Hence in a way, this move was like an economical surgical strike on these terrorist groups. While these were the possible positive effects, there was a lot of concern expressed on the negative effects of this scheme, especially in the rural areas. While India has about 10 lakh bank branches all over the country, about 6.8 lakh villages alone and most of these villages have no access to a bank. At the same time there have been a lot of remedial measures that have been suggested in the past few weeks. There have been teams set up to ensure the smooth flowing of this process. There are also going to be micro ATM’s in function soon which would help those in need both deposit and withdraw cash. Slowly and steadily normalcy seems to be prevailing and the government does seem to have accomplished a major feat.
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