On 08 Nov 2016, while USA was voting for its President, in India a spectacular event took place. At about 8 PM, Indian Prime Minister Mr Modi came live on TV and addressed the nation. Considering the recent hostilities between India and Pakistan following Indian surgical strike at the terrorist’s camps located in POK, most of us thought that the PM might announce the intention of having a full strike against the adversary, but his address revealed another type of surgical strike and this time the target was the Black money being hoarded by many within the country. Indian currency notes of Rs 1000 and Rs 500 which formed 86% part of the total currency supply of India were declared not to be legal tender from midnight of Tuesday and what ever holding of these notes people had could be deposited in the banks for replacement at the rate of Rs 4000 per day for the next 50 days with a rider that a total sum of Rs 250000 could be deposited in the bank accounts without any question, beyond which the tax authorities would ask you the source of funds. Only minor denomination currency of Rs 100 and below was to stay in circulation and subsequently the addition of new currency of Rs 500 and Rs 2000 note would take place within a month.
While for the honest tax payers this was not much of the problem as one had only 4-5 notes of such denomination at home drawn earlier from the ATMs, it did give sleepless nights to those who had amassed worth millions/crores of Rupees. All of a sudden such money became useless or very difficult to convert to white money. Last few days have seen long serpentine lines of people in front of banks and these are common people who have paid their taxes and do not have much hoarding of black money, Even I had to spend about two hours in a queue to get my three notes of Rs 500 denomination to be changed. Despite inconvenience and hardship people were generally appreciative of the steps taken by the government. Even the ATMs did not function for the next two days and are slowly getting back on road. Many of us have started using using our plastic money more and more to offset the deficiency of cash. The old currency of Rs 1000 and 500 could still be used for next three days at the hospitals, to fill gas, to buy air and rail tickets, to buy medicines etc. I personally feel that this is a great and bold step to put back the economy of the country on solid footings and most of us welcome it.
Now about the people who might have hoarded large amount of high value currency notes were in a fix and have tried to wriggle out in various manner. As per the newspaper and TV reports some of the methods were as under.
1. Purchase of gold at very high premium from jewelers who back dated these transactions.
2. Booked flight tickets for many destinations through cash for many members of their families and later cancelled it to get the refund in new currency or direct remittance in their bank.
3. Large anonymous donations to religious institutions in cash.
4. Some even threw their money in rivers and drains. Currency notes were found in Ganges river.
5. Since sex workers were accepting such high currency notes in Kolkata and other places their clients increased many fold during the night of 8/9 Nov. It is learnt that they had increased their rates. Sex workers would then deposit the amount in their cooperative banks slowly in small amounts to be replaced by the new currency.
6. Foreign exchange operators were reported to be making huge profits by converting old currency into foreign currency at 100% premium.
7. Deposit of such currency through Agriculturists (in small amounts), since the farming is not subjected to income tax.
Some of the humorous and interesting anecdotes which which have come to the fore are worth mentioning.
- The common belief world over that India is a poor country has been proved wrong. Many beggars have been found to possess between one to five million of Rupees in high denomination notes of Rs 500 and 1000. These guys do not have any bank accounts nor do they have any identification papers. How would they deposit their money in the banks and convert the cash. These guys have accumulated this cash over a number of years and converted into high denominations. These people really do not know what to do.
- Low level employees like peons who were working in high public offices and made money by corruption have more than millions of cash stashed.
- Some lady wives who have been putting away some amount taken from their husband’s earning for years quietly have large sums of cash; they would have to explain to their husbands as well the bank authorities; an embarrassing turn of things.
- High level corrupt officials who have amassed over hundreds of crores of Rupees and have not much avenue to adjust might either destroy the cash or distribute small amounts among the poor.
As of now even the honest people who have old currency notes have difficulty in getting rid of these as it entails long lines in front of banks. One of my face book friends got petrol (gas) filled with these old notes ( as this is permitted for some time) , he commented.
“After getting gas filled with two old five hundred notes, I feel as if I have disposed off a dead body.”
Some other interesting comment found in Indian news papers on the subject on 09 Nov.
” US is counting votes while India is counting money.”