Topic- Will the abolishment of
500 and 1000 Rupee notes help India curb black money?
“Black money is so
much a part of our white economy, a tumor in the center of the brain- try to
remove it and you kill the patient.”
– Rohinton Mistry
View:
Prime Minister
Narendra Modi’s address to the nation was a surprise, but the prevalence of
counterfeit currency notes in India is not. Neither is thousands of crores
stashed as black money. This move is very bold and decisive, which will
tremendously impact the circulation of counterfeit notes in our economy. More
importantly, the money stashed in the black economy will become redundant,
thereby sealing the cavity through which billions of dollars were being
siphoned off.
Although arguments
persist that people hoarding black money do not necessarily do so in the form
of liquid cash, it has to be acknowledged that even in a corrupt system like
ours, it is not very simple to convert ‘black’ money to ‘white’. This process
becomes more difficult when the hordes of liquid cash suddenly become
redundant, making it illegal tender.
The move announced
by the Prime Minister targets another group of criminals- counterfeiters. The
prevalence of counterfeit or ‘fake’ notes in our economy is mind boggling.
Foreign interests that are inherently against Indian economic growth and
development seek to use this mechanism to cause havoc in the Indian economy.
Estimates suggest that for every 10 lakh notes, 250 are counterfeit. David
Headely, the criminal behind the 26/11 attacks on Mumbai used counterfeit notes
to procure weapons and carry out attacks on India. With the introduction of new
series of notes, that too abruptly, will have a great positive impact on the
counterfeit market. The fake notes already in circulation are, again, redundant.
Many arguments also
point out to the stash of black money overseas, especially in Swiss Banks.
After the steps announced by Mr. Modi, the conversion of Indian money into a
foreign currency, so as to make it legal will also become complicated, if not
impossible. Round-tripping of black money is another issue. Round-tripping
refers to the process by which black money stashed abroad is disguised as
foreign capital and sent back to India. This process will become difficult as
the conversion of Indian currency overseas, mostly stashed as 500/ 1000 rupees
notes will no longer be valid.
Finally, to make
this move more effective, the parliament must pass legislations that will
impose harsher penalties on persons hoarding black money. The concessions given
to defaulters must be stopped immediately and the black money hoarded by them
should be fully seized.
Following the above
arguments, it can be concluded that this move will help curb black money in
India and prevent counterfeiting.
-
Nishant
1 BBA ‘A’
Counter
View:
On November the 8th
late evening Prime Minister Narenhdra Modi rocked the Nation by discontinuing
the use of 500 and 1000 Rupee notes with effect from midnight. This
demonetization was done to counter black money, fake currency, corruption and
cross border terrorism.
This surgical
strike created ripples in the stock market, panic among common citizens and it
stunned political circles. Social media went berserk with all types of
interpretations of this announcement. While it was highly appreciated by
certain people, many felt the brunt of the situation as they were left with
little or no notes of lower denominations.
Experts predict that
one of the major repercussions of this move would be heavy deflation, as there
would be reduction of total currency circulation in the economy as people who
have earned money through illegal means would be afraid to declare the money.
While the rich
folks with black money may find a way to work around the situation, it is the
common man who is really suffering. This move deeply impacts the working
sections of society: drivers, maids, cooks, electricians, plumbers. They are
not well versed with card transactions and some do not even possess a bank
account.
The E-commerce
industry is preparing for a period of low demand and sales as most of their
payments are received on a Cash - On - Delivery basis. The tourism industry,
especially those in the outbound travel space, predict a dip in business. Tour
operators have already had to cancel a number of arranged trips on request of
their clients. Political campaigns in the near future may also take a hit as
most of them rely on unaccounted money.
Real Estate is one
sector that is likely to be the most affected. It contributes about 11 percent
of the gross domestic product. Investment in property is a common means of
parking unaccounted money and a large number of transactions in real estate are
either not reported or are under-reported. But with Modi's sudden move, this
sector is now under immense pressure and a downtrend in business activity is
inevitable.
The problem lies in
the fact that the plan seems badly thought out and unorganized to some extent.
It provides little clarity on what prevents the new notes from being used as
“black money” in the future.
-
Alyssa Merchant & Anoushka Fernandes,
1 BBA 'A'
Editor’s opinion:
At the outset it is a proud moment when a
news in your country is trending more online and on media than US President
Elections. A bold move by The Indian Government that would definitely reduce
corruption. However it is unplanned and unorganized. Such a short notice is too
quick to comprehend and will lead to a lot of confusions in the market and huge
problems for the common man.
Rural Poor and uneducated are unaware of this change and will face dilemma when no one accepts high denomination notes.
For those still without debit or credit cards, imagine the trouble and difficulty when one has to carry many 100 rupee notes for eating at a fine dining restaurant or monthly shopping of household groceries and other essentials that amount to thousands.
People may lose confidence in the Monetary System and value of Rupee. Stock markets will be adversely affected and personal and infrastructure projects halted.
Ridiculous to keep banks and ATMs closed on 9th Nov and make legal tender invalid overnight on 8th. The middle class who has only 500's and 1000's will suffer as they cannot pay for transport etc.
Black money cannot be fully eliminated. Most of it is in the form of land and other Investments, expensive luxury goods, gold or cars. Those people in the ruling party who got to know about this much earlier or received an advance intimation may have made other arrangements.
Some questions that are still unanswered why does the Government that has been in power for some time now wake up suddenly and take a decision that would have such a huge impact so fast without much debate and discussion? What about Indian Citizens abroad who still possess home currency? With the long queues outside banks and an upper limit, will the exchange of billions be smooth and efficient as expected?
Rural Poor and uneducated are unaware of this change and will face dilemma when no one accepts high denomination notes.
For those still without debit or credit cards, imagine the trouble and difficulty when one has to carry many 100 rupee notes for eating at a fine dining restaurant or monthly shopping of household groceries and other essentials that amount to thousands.
People may lose confidence in the Monetary System and value of Rupee. Stock markets will be adversely affected and personal and infrastructure projects halted.
Ridiculous to keep banks and ATMs closed on 9th Nov and make legal tender invalid overnight on 8th. The middle class who has only 500's and 1000's will suffer as they cannot pay for transport etc.
Black money cannot be fully eliminated. Most of it is in the form of land and other Investments, expensive luxury goods, gold or cars. Those people in the ruling party who got to know about this much earlier or received an advance intimation may have made other arrangements.
Some questions that are still unanswered why does the Government that has been in power for some time now wake up suddenly and take a decision that would have such a huge impact so fast without much debate and discussion? What about Indian Citizens abroad who still possess home currency? With the long queues outside banks and an upper limit, will the exchange of billions be smooth and efficient as expected?
-
Mohamed
Owais Adam
2 BBA ‘A’
