sample copy. not for distribution. · demonetization of the 500- and 1,000-rupee notes, kudos to...
TRANSCRIPT
ii
Publishing-in-support-of,
EDUCREATION PUBLISHING
RZ 94, Sector - 6, Dwarka, New Delhi - 110075 Shubham Vihar, Mangla, Bilaspur, Chhattisgarh - 495001
Website: www.educreation.in
________________________________________________________________
© Copyright, Authors
All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form by any means, electronic, mechanical, magnetic, optical, chemical, manual, photocopying, recording or otherwise, without the prior written consent of its writer.
ISBN: 978-1-61813-709-8
Price: ` 360.00
The opinions/ contents expressed in this book are solely of the authors and do not represent the opinions/ standings/ thoughts of Educreation or the Editors . The book is released by using the services of self-publishing house.
Printed in India
Sample Copy. Not for Distribution.
iii
The war on cash Demonetisation
CA Dr Khushboo Jain
EDUCREATION PUBLISHING (Since 2011)
www.educreation.in
Sample Copy. Not for Distribution.
v
Disclaimer
The information contained in this book is for general information
purposes only. We assume no responsibility for errors or omissions in the
contents on the Service. In no event shall we or any of our affiliates or
employer be liable for any special, direct, indirect, consequential, or
incidental damages or any damages whatsoever, whether in an action of
contract, negligence or other tort, arising out of or in connection with the
use of the manuscript or the contents of the book. We reserve the right to
make additions, deletions, or modification to the contents on the Service
at any time without prior notice. We do not warrant that the book is free
of errors or other harmful components. External references in book may
contain links to other publication that are not provided or maintained by
or in any way affiliated with us. Please note that the Author or its
associates or employers does not guarantee the accuracy, relevance,
timeliness, or completeness of any information. You should not rely on
this information as a substitute for, nor does it replace, professional
financial advice. Disclaimer: Legal information is not legal advice. Read
the disclaimer.
Sample Copy. Not for Distribution.
vii
Dedication
In the vastness of space and immensity of time, it is my joy to spend a
planet and an epoch with my family. This Book is dedicated to my
family, father, mother, mother-in-law, father-in-law and my husband.
They encouraged me and supported to all while to complete this book.
This book is dedicated to entire banking fraternity, When there has
been commotion all over the country since the announcement of
demonetization of the 500- and 1,000-rupee notes, kudos to the banking
fraternity for commendable work done. All praise for bank employees,
who are working from morning to the late hours for the noteban days for
the benefit of customers, for exchanging high denominations, collection
of deposits and other regular banking transactions. All necessary
arrangements have been made by banks as well as the government to
ensure hassle-free transactions. Bank staff, called upon to undertake this
gigantic task at such a short notice, has risen to the occasion without
complaining
Lastly this book is dedicated to my sweet 2 year daughter Ishika
who stayed patiently cooperated in her way while, I was working on the
demonetisation charter.
Sample Copy. Not for Distribution.
viii
Foreword
The book, 'The war on cash --Demonetization' by Dr Khushboo Jain
reveals the different aspects of demonetization layer by layer. Due to
demonetization 86 % of the currency came back to the banks which were
in form of Rs 500 and Rs 1000 notes. Indian economy which is worth
nearly 2 trillion dollars had shrunk in a way for few days.
Demonetization certainly created a huge ripple in the vast oceans of
Indian financial system. CA (Dr) Khushboo Jain being an accomplished
Banker and expert in financial and economic purview has put together a
fact-packed work which also exposes several popular myths in a
systematic way.
As the Indian proverb goes, 'Honhaar Birbaan ke hot chikne paat',
she started showing her extraordinary capabilities at a pretty young age.
She had received the recognition of being India‟s youngest CA. At a
young age of 14 she had cleared her high school with merit and she
already held a doctorate by the time she became 24. She is a passionate
banker and has in-depth knowledge of financial institutions.
Demonetization was seen as a weapon for fighting corruption and
terrorism in India. It was already considered a powerful tool for
controlling the black money economy. The book not only includes the
challenges ahead for the Indian economy post demonetization, but also
looks at the possibilities ahead.
The book takes you on the 50 day roller coaster post
demonetization. The book looks at several key questions on the minds of
Indian citizens such as ; -
Is India ready for a cashless economy?
What does a cashless economy mean for an average citizen?
How will rural India adopt to the challenges of a cashless economy?
Will digitized transactions control the black money and terror
operations in a significant way? And so on.
The book also throws light on the government machinery,
technology and policy mechanisms. Giving such a lucid explanation of
such a complex topic in such a short period of time was not an easy task
for sure, yet Dr CA Khushbu has not just done it, she has rather done it
well.
--Dr. Prakash Hindustani
Prakashhindustani.com
Sample Copy. Not for Distribution.
ix
Foreword
In the night Donald Trump was elected the next US president and on
same night, In a surprise TV address Narendra Modi, the Indian prime
minister, announced that all 500- and 1,000-rupee notes would be
withdrawn immediately from circulation. At a stroke Mr Modi rendered
86% of currency worthless outside a bank branch.
This brought an ripple in the financial system in the economy and
banking, CA(Dr) Khushboo Jain an accomplished Banker and expert in
financial economic purview put together "An illuminating, provocative
and fact-packed work that does make you wonder why was such scheme
launched and what impact it has on common men. It also exposes some
well-worn pub truths as urban myths of banking system.
"Meticulously written, [The war on Cash] covers everything needed
for such a monetary reform. But the book is not excessively polemical.
CA (Dr.) Khushboo details almost all the arguments for and against
tinkering with paper currency, then banking labors to refute or defuse
them." Khushboo is on very solid ground is when she says the process of
weaning us further off cash should begin with the abolition of high-
denomination notes." Khushboo makes a compelling case for the crime-
fighting power of Indian demonetisation about India‟s WAR on CASH"
It was justified as a move designed to fight corruption and target
people who have been dodging taxes by holding stockpiles of cash,
known in India as “black money”.
This Book gives a complete analysis for Indian Demonetisation
Scheme. Delegalisation in the current form as India has attempted is the
largest ever macro-economic programme ever attempted consciously. It
has been a huge leap of faith for the policy mandarins in India led by the
Prime Minister.
Many initially saw the withdrawal of banknotes as a price worth
paying to eliminate graft. The short-term impact of “demonetisation” has
been dramatic: the $2 trillion Indian economy will shrink. This book
analyzes and gives the road ahead for Indian economy post
demonetisation.
[The WAR on Cash] is a fascinating contribution to the debate
about what might be done to help get many other countries out of an
economic funk.
This book sets the standard on analysis of the demonetization
scheme and more important; it is also sure to influence discussions about
the ability of central banks to deliver growth and financial stability.
Sample Copy. Not for Distribution.
x
Khushboo explain the journey of 50 Days of demonetisation and
what faired on the opposite side on table from the Banker. "Should we
become a largely cashless society? This book touches on economy,
government machinery , technology, and monetary policy. Clearly and
persuasively evaluated the demonetisation scheme and its benefits.
Sample Copy. Not for Distribution.
xi
50 Days of India’s War on Cash
50
The number days Mr. Modi asked Indians to bear with him. “Give me
time until December 30,” Mr. Modi said. “After that, if any fault is found
in my intentions or my actions, I am willing to suffer any punishment
given by the country.”
12.44 TRILLION RUPEES ($183 BILLION)
The value of old 500- and 1,000-rupee notes that Indians exchanged up
to Dec. 13, according to RBI Deputy Governor R. Gandhi. The RBI said
earlier this year the total amount of notes in circulation in the country
was valued 16.42 trillion, about 86% of which was in notes of 500 and
1,000 rupees
2.2 BILLION
The number of 500- and 2,000-rupee bills the RBI issued between Nov.
10 and Dec. 21, according to the RBI. That is a small proportion of the
22.6 billion bills of all denominations it issued during the period.
14 MILLION
The number of users Paytm, India‟s largest mobile-payment company,
said this month it has added since the government‟s decision to scrap the
notes on Nov. 8.
ALMOST 215,000
Of the 215,000 ATMs in India, almost all have been recalibrated,
according to a spokesman for NCR, the market-leader for providing cash
machines in the country. The machines need to be adjusted so they can
issue the new, slimmer notes.
Sample Copy. Not for Distribution.
xii
The War On Cash - Demonetisation
Sr No. Chapter Page
1. Introduction 1
2. Actions initiated by government 12
3. Need of Demonetisation and its remedy 21
4. Salient features of the Scheme 37
5. Reactions on Demonetisation 41
6. Impact on various sectors. 55
7. How indian economy went of rail and what future
looks like
75
8. Closure of Scheme 85
9. Demerits of Demonetisation 89
10. Merits of Demonetisation 98
11. Days ahead demonetisation 106
12. Conclusion 118
Sample Copy. Not for Distribution.
The war on cash-Demonetisation
1
Chapter 1
Introduction
W
It was all so dramatic, the cheer and trepidation, on November 8 when
the prime minister announced the demonetisation Rs 500 and Rs 1000
notes. It was the „surgical strike‟ in his government‟s crusade against
„black money‟.
Government of India vide their notification no. 2652 dated
November 8 2016 has decided discontinue the legal tender character of
high denomination banknotes of Rs 500 and Rs 1000. In other words
such notes will not be a legal tender from midnight of nov 8 2016. This
decision is being made to curb financing of terrorism through the
proceeds of Fake indian Currency Notes and for eliminating black
money.
The announcement was made by the Prime Minister of India
Narendra Modi in an unscheduled live televised address at 20:00 Indian
Standard Time (IST) on 8 November.In the announcement, Modi
declared that use of all `500 and `1,000 banknotes of the Mahatma
Gandhi Series would be invalid past midnight, and announced the
issuance of new `500 and `2,000 banknotes of the Mahatma Gandhi New
Series in exchange for the old banknotes. The banknotes of `100, `50,
`20, `10 and `5 of the Mahatma Gandhi Series and `2 and `1 remained
legal tender and were unaffected by the policy.
The government claimed that the demonetisation was an effort to
stop counterfeiting of the current banknotes allegedly used for funding
terrorism, as well as a crackdown on black money in the country. The
move was also described as an effort to reduce corruption, the use of
drugs, and smuggling.
India‟s ambitious exchange of currency notes is novel. Very few
other countries have repudiated the value of over 85% of outstanding
currency. The primary aim is eliminating the stocks of cash held as
“black money” to make payments in the informal economy, to avoid
taxes, or to fund illicit activity. It may diminish the use of cash in the
future, whether for legitimate or black money-linked activity. It could
Sample Copy. Not for Distribution.
Dr Khushboo Jain
2
also impact the money supply, interest rates, financial inclusion and
government finances. This brief attempts to gauge the magnitude and
breadth of impact of this major policy move.
The issue of India‟s black money brings to mind the garlands of
rupee notes presented to Kumari Mayawati on her birthday when she was
chief minister of the state of Uttar Pradesh. Untraceable, black money
notoriously funds political campaigns and facilitates tax evasion—
notably stamp duties in real estate—as well as, of course, explicitly
illegal activity. Nobody really knows the amount of black money in
India. Various guesses put it at a fifth to a third of the Rs17 trillion
currency in circulation (about US$250 billion). On top of true black
money, counterfeit currency plays a largely similar role and is a widely
acknowledged problem. Various formal estimates exist on the amount of
counterfeit currency in India, ranging from four to 0.004 counterfeit
pieces per thousand bills in circulation.1 Much higher unofficial
estimates circulate in New Delhi among law enforcement officials.
Indian Prime Minister Narendra Modi made a surprise TV
announcement in New Delhi Tuesday evening that the current 500 and
1,000 rupee notes would cease to be legal tender at midnight early
Wednesday.The notes will be replaced by new 500 and 2,000 rupee
notes, Mr. Modi said.
Here‟s the full text of the speech in which he made the
announcement
My dear citizens,
I hope you ended the festive season of Diwali with joy and new
hope. Today, I will be speaking to you about some critical issues and
important decisions. Today I want to make a special request to all of you.
You may recall the economic situation in May 2014 when you entrusted
us with an onerous responsibility. In the context of BRICS, it was being
said that the “I” in BRICS was shaky. Since then, we had two years of
severe drought. Yet, in the last two and a half years with the support of
125 crore Indians, India has become the “bright spot” in the global
economy. It is not just we who are saying this; it is being stated by the
International Monetary Fund and the World Bank.
In this effort for development, our motto has been „Sab Ka Saath
Sab Ka Vikas‟: We are with all citizens and for development of all
citizens. This Government is dedicated to the poor. It will remain
dedicated to them. In our fight against poverty, our main thrust has been
to empower the poor, and make them active participants in the benefits of
economic progress.
Sample Copy. Not for Distribution.
The war on cash-Demonetisation
3
The Pradhan Mantri Jan Dhan Yojana, the Jan Suraksha Yojana, the
Pradhan Mantri Mudra Yojana for small enterprises, the Stand-up India
program for Dalits, Adivasis and women, the Pradhan Mantri Ujjwala
Scheme for gas connections in the homes of the poor, the Pradhan Mantri
Fasal Beema Yojana and Pradhan Mantri Krishi Sinchai Yojana to
protect the income of farmers, the Soil Health Card Scheme to ensure the
best possible yield from farmers‟ fields, and the e-NAM National Market
Place scheme to ensure farmers get the right price for their produce—
these are all reflections of this approach.
In the past decades, the specter of corruption and black money has
grown. It has weakened the effort to remove poverty. On the one hand,
we are now no.1 in the rate of economic growth. But on the other hand,
we were ranked close to one hundred in the global corruption perceptions
ranking two years back. In spite of many steps taken, we have only been
able to reach a ranking of seventy-six now. Of course, there is
improvement. This shows the extent to which corruption and black
money have spread their tentacles.
The evil of corruption has been spread by certain sections of society
for their selfish interest. They have ignored the poor and cornered
benefits. Some people have misused their office for personal gain. On the
other hand, honest people have fought against this evil. Crores of
common men and women have lived lives of integrity. We hear about
poor auto-rickshaw drivers returning gold ornaments left in the vehicles
to their rightful owners. We hear about taxi drivers who take pains to
locate the owners of cell phones left behind. We hear of vegetable
vendors who return excess money given by customers.
There comes a time in the history of a country‟s development when
a need is felt for a strong and decisive step. For years, this country has
felt that corruption, black money and terrorism are festering sores,
holding us back in the race towards development.
Terrorism is a frightening threat. So many have lost their lives
because of it. But have you ever thought about how these terrorists get
their money? Enemies from across the border run their operations using
fake currency notes. This has been going on for years. Many times, those
using fake 500 and 1,000 rupee notes have been caught and many such
notes have been seized.
Brothers and sisters,
On the one hand is the problem of terrorism; on the other is the
challenge posed by corruption and black money. We began our battle
against corruption by setting up an SIT headed by a retired Supreme
Court judge, immediately upon taking office. Since then a law was
passed in 2015 for disclosure of foreign black money;
Sample Copy. Not for Distribution.
Dr Khushboo Jain
4
agreements with many countries, including the USA, have been
made to add provisions for sharing banking information;
a strict law has come into force from August 2016 to curb benami
transactions, which are used to deploy black money earned through
corruption;
a scheme was introduced for declaring black money after paying a
stiff penalty;
My dear countrymen,
Through all these efforts, in the last two and a half years, we have
brought into the open nearly 1 lakh 25 thousand crore rupees of black
money belonging to the corrupt. Honest citizens want this fight against
corruption, black money, benami property, terrorism and counterfeiting
to continue. Which honest citizen would not be pained by reports of
crores worth of currency notes stashed under the beds of government
officers? Or by reports of cash found in gunny bags?
The magnitude of cash in circulation is directly linked to the level of
corruption. Inflation becomes worse through the deployment of cash
earned in corrupt ways. The poor have to bear the brunt of this. It has a
direct effect on the purchasing power of the poor and the middle class.
You may yourself have experienced when buying land or a house, that
apart from the amount paid by check, a large amount is demanded in
cash. This creates problems for an honest person in buying property. The
misuse of cash has led to artificial increase in the cost of goods and
services like houses, land, higher education, health care and so on.
High circulation of cash also strengthens the hawala trade which is
directly connected to black money and illegal trade in weapons. Debate
on the role of black money in elections has been going on for years.
Brothers and sisters,
To break the grip of corruption and black money, we have decided
that the 500 rupee and 1,000 rupee currency notes presently in use will
no longer be legal tender from midnight tonight, that is 8th November
2016. This means that these notes will not be acceptable for transactions
from midnight onwards. The 500 and 1,000 rupee notes hoarded by anti-
national and anti-social elements will become just worthless pieces of
paper. The rights and the interests of honest, hard-working people will be
fully protected. Let me assure you that notes of 100, 50, 20, 10, five, two
and one rupee and all coins will remain legal tender and will not be
affected.
Sample Copy. Not for Distribution.
The war on cash-Demonetisation
5
This step will strengthen the hands of the common man in the fight
against corruption, black money and fake currency. To minimize the
difficulties of citizens in the coming days, several steps are being taken.
1. Persons holding old notes of 500 or 1,000 rupees can deposit these
notes in their bank or post office accounts from 10th November till
close of banking hours on 30th December 2016 without any limit.
2. Thus you will have 50 days to deposit your notes and there is no
need for panic.
3. Your money will remain yours. You need have no worry on this
point.
4. After depositing your money in your account, you can draw it when
you need it.
5. Keeping in mind the supply of new notes, in the first few days, there
will be a limit of 10,000 rupees per day and 20,000 rupees per
week. This limit will be increased in the coming days.
6. Apart from depositing your notes in your bank account, another
facility will also be there.
7. For your immediate needs, you can go to any bank, head post office
or sub post office, show your identity proof like Aadhaar card, voter
card, ration card, passport, PAN card or other approved proofs, and
exchange your old 500 or 1,000 rupee notes for new notes.
8. From 10th November till 24th November the limit for such
exchange will be 4,000 rupees. From 25th November till 30th
December, the limit will be increased.
9. There may be some who, for some reason, are not able to deposit
their old 500 or 1,000 rupee notes by 30th December 2016.
10. They can go to specified offices of the Reserve Bank of India up to
31st March 2017 and deposit the notes after submitting a
declaration form.
11. On 9th November and in some places on 10th November also,
ATMs will not work. In the first few days, there will be a limit of
2,000 rupees per day per card.
12. This will be raised to 4,000 rupees later.
13. 500 and 1,000 rupee notes will not be legal tender from midnight.
However for humanitarian reasons, to reduce hardship to citizens,
some special arrangements have been made for the first 72 hours,
that is till midnight on 11th November.
14. During this period, government hospitals will continue to accept 500
and 1,000 rupee notes for payment.
Sample Copy. Not for Distribution.
Dr Khushboo Jain
6
15. This is for the benefit of those families whose members may be
unwell.
16. Pharmacies in government hospitals will also accept these notes for
buying medicines with doctors‟ prescription.
17. For 72 hours, till midnight on 11th November, railway ticket
booking counters, ticket counters of government buses and airline
ticket counters at airports will accept the old notes for purchase of
tickets. This is for the benefit of those who may be travelling at this
time.
18. For 72 hours, 500 and 1,000 rupee notes will be accepted also at
Petrol, diesel and CNG gas stations authorized by public sector oil
companies
Consumer co-operative stores authorized by State or Central
Government
Milk booths authorized by State governments
Crematoria and burial grounds.
These outlets will have to keep proper records of stock and
collections.
19. Arrangements will be made at international airports for arriving and
departing passengers who have 500 or 1,000 rupee notes of not
more than 5,000 rupees, to exchange them for new notes or other
legal tender.
20. Foreign tourists will be able to exchange foreign currency or old
notes of not more than Rs 5,000 into legal tender.
21. One more thing I would like to mention, I want to stress that in this
entire exercise, there is no restriction of any kind on non-cash
payments by checks, demand drafts, debit or credit cards and
electronic fund transfer.
Brothers and sisters,
In spite of all these efforts there may be temporary hardships to be
faced by honest citizens. Experience tells us that ordinary citizens are
always ready to make sacrifices and face difficulties for the benefit of the
nation. I see that spirit when a poor widow gives up her LPG subsidy,
when a retired school teacher contributes his pension to the Swacch
Bharat mission, when a poor Adivasi mother sells her goats to build a
toilet, when a soldier contributes 57,000 rupees to make his village clean.
I have seen that the ordinary citizen has the determination to do anything,
if it will lead to the country‟s progress.
Sample Copy. Not for Distribution.
The war on cash-Demonetisation
7
So, in this fight against corruption, black money, fake notes and
terrorism, in this movement for purifying our country, will our people not
put up with difficulties for some days? I have full confidence that every
citizen will stand up and participate in this „mahayagna‟. My dear
countrymen, after the festivity of Diwali, now join the nation and extend
your hand in this Imandaari ka Utsav, this Pramanikta ka Parv, this
celebration of integrity, this festival of credibility.
I am sure that all political parties, all governments, social services
organizations, the media and indeed all sections of the society will take
part in this with enthusiasm and make it a success.
My dear countrymen,
Secrecy was essential for this action. It is only now, as I speak to
you, that various agencies like banks, post offices, railways, hospitals
and others are being informed. The Reserve Bank, banks and post offices
have to make many arrangements at very short notice. Obviously, time
will be needed. Therefore all banks will be closed to the public on 9th
November. This may cause some hardship to you. I have full faith that
banks and post offices will successfully carry out this great task of
national importance. However, I appeal to all of you to help the banks
and post offices to meet this challenge with poise and determination.
My dear citizens,
From time to time, based on currency needs, the Reserve Bank with
the approval of the Central Government brings out new notes of higher
value. In 2014, the Reserve Bank sent a recommendation for issue of
5,000 and 10,000 rupee notes. After careful consideration, this was not
accepted. Now as part of this exercise, RBI‟s recommendation to issue
2,000 rupee notes has been accepted. New notes of 500 rupees and 2,000
rupees, with completely new design will be introduced. Based on past
experience, the Reserve Bank will hereafter make arrangements to limit
the share of high denomination notes in the total currency in circulation.
In a country‟s history, there come moments when every person feels
he too should be part of that moment, that he too should make his
contribution to the country‟s progress. Such moments come but rarely.
Now, we again have an opportunity where every citizen can join this
mahayajna against the ills of corruption, black money and fake notes.
The more help you give in this campaign, the more successful it will be.
It has been a matter of concern for all of us that corruption and black
money tend to be accepted as part of life. This type of thinking has
afflicted our politics, our administration and our society like an
infestation of termites. None of our public institutions is free from these
termites.
Sample Copy. Not for Distribution.
Dr Khushboo Jain
8
Time and again, I have seen that when the average citizen has to
choose between accepting dishonesty and bearing inconvenience, they
always choose to put up with inconvenience. They will not support
dishonesty.
Once again, let me invite you to make your contribution to this
grand sacrifice for cleansing our country, just as you cleaned up your
surroundings during Diwali.
Let us ignore the temporary hardship.
Let us join this festival of integrity and credibility.
Let us enable coming generations to live their lives with dignity.
Let us fight corruption and black money.
Let us ensure that the nation‟s wealth benefits the poor.
Let us enable law-abiding citizens to get their due share.
I am confident in the 125 crore people of India and I am sure
country will get success.
Thank you very much. Thanks a lot.
Namaskar.
Bharat Mata Ki Jai.
However, in the days following the demonetisation, banks and
ATMs across the country faced severe cash shortages] with severe
detrimental effects on a number of small businesses, agriculture, and
transportation. People seeking to exchange their notes had to stand in
lengthy queues, and several deaths were linked to the inconveniences
caused due to the rush to exchange cash. Also, following the
announcement, the BSE SENSEX and NIFTY 50 stock indices crashed
for the next two days.
Initially, the move received support from several bankers as well as
from some international commentators. It was heavily criticised by
members of the opposition parties, leading to debates in both houses of
parliament and triggering organised protests against the government in
several places across India. As the cash shortages grew in the weeks
following the move, the demonetization was heavily criticised by
prominent economists, such as Kaushik Basu, Paul Krugman, Amartya
Sen and Steve Forbes.
The Government of India devised an Income Declaration Scheme
(IDS), which opened on 1 June and ended on 30 September 2016. Under
the scheme, the black money holders could come clean by declaring the
assets, paying the tax and penalty of 45% thereafter.
After Modi's announcement, the Governor of the Reserve Bank of
India, Urjit Patel, and Economic Affairs secretary, Shaktikanta Das
explained in a press conference that one purpose of the action was to
Sample Copy. Not for Distribution.
The war on cash-Demonetisation
9
fight terrorism funded by counterfeit notes. While the supply of notes of
all denominations had increased by 40 percent between 2011 and 2016,
the `500 and `1,000 banknotes increased by 76 percent and 109 percent,
respectively, owing to forgery. They said that forged cash was used to
fund terrorist activities against India and that the demonetisation had a
counter-terrorism purpose.
Patel also informed that the decision had been made about six
months ago, and the printing of new banknotes of denomination `500
and `2,000 had already started. However, only the top members of the
government, security agencies and the central bank were aware of the
move. But media had reported in October 2016 about the introduction of
`2,000 denomination well before the official announcement by RBI. This
statement has led to much debate, because the Reserve Bank governor
six months before the announcement was Raghuram Rajan, while the
new banknotes have the signature of the newly appointed governor, Urjit
Patel.
India's Demonetization 50 Days In - Not Perfect But Moving
In The Right Direction
We're just hitting the 50 day stage in Prime Minister Narendra Modi's
campaign to move India to a less cash, if not a cash less, society. Part of
this was demonetization, the taking of the old Rs 500 and Rs 1,000 notes
out of circulation. That was 86% of the money supply by value that had
to cycle through the banks, either to be exchanged in limited numbers for
the new Rs 500 and Rs 2,000 notes or to be deposited into banks. There
is distinct controversy about whether this is all worth it and if we look at
this one specific action in isolation perhaps not. However, as part of the
general campaign it is, as I've been saying, a most welcome addition.
And to come back to the major and important point. Is
demonetization, as just demonetization, a great success? May be likely
No, it isn't, and it never would have been. The aim is to crack down upon
black money in the Indian economy. To get everything moved into the
licit and taxed economy. Both so it can be taxed and also so that the
pernicious effects of bribes and favors which so distort the economy can
be limited. The reason it never was going to have much effect is that the
major distortions here are not in cash rupees. Seriously rich people are in
land, or gold, or dollars, or Switzerland. It's very much the small scale
stuff that is taking place in Rs 1,000 notes. No, really, vast black market
transactions do not take place with piles of Rs 1,000 notes.
The part something I've only heard about through the grapevine.
This is gossip, no more. But useful gossip all the same. Starting in 12
months‟ time the Swiss banks will be sharing information with the Indian
government on those Indian citizens who have accounts there. That does
Sample Copy. Not for Distribution.
Dr Khushboo Jain
10
strike rather harder at significant amounts of black money. And what I'm
hearing is that this is stampeding rich Indians into actually getting proper
tax advice for the first time. No, this doesn't quite mean that they are
about to pay all and every tax that could possibly be due. But people who
used to rely upon the hawala system to entirely ignore the tax laws are
now looking for legal ways in which to reduce, rather than not have at
all, their tax bills.
That is, the offshore money is beginning to move from tax evasion
to tax avoidance which is indeed an advance in people obeying the law.
One way of thinking about all of the above is that I'm saying that
demonetization is the side show, the public play if you like, while the
important things about black money are going on elsewhere. And that is
one way to read it if you wish. However, I regard it the other way
around. I think it's much more important that everyone thinks the game is
roughly fair than I do worry about a few scofflaws not paying taxes.
Thus it might well be the benami laws, or the Swiss banks, which are
more important in raising tax revenues. But to me it is the creation of the
confidence which leads to that chai wallah investing in the chapati stand
which is what will grow the economy and thus the demonetization,
precisely as that piece of public theatre, which is the most important part
of the entire campaign.
Several economist also opined that control economy is for fertile
land for black money. Anna Hazare‟s agitation against corruption in
2011 , better known as “Bharashtracharya Virodhi Andolan” compelled
the government to announce in parliament in november 2011 that it will
prepare whitepaper on blackmoney. The paper was tabled in may 2012.
In parliament by honorable finance minister. As this paper was in
response to Anna Hazare‟s agitation against corruption. The public at
large expected that the , “ Whitepaper on Black Money” would provide
ways and means to curb corruption and there by to eliminate
blackmoney.
During the year , 2011 Anna Hazare agitation against corruption
moved the citizen particular youth of India in favour of this agitation.
During the almost small time there was news in media enormous amount
of blackmoney is staged abroad , particularly swiss bank. Initially
government tried to pacify the agitators by interesting the job of
assessing the amount of unaccounted income and wealth both inside and
outside the country and to suggest ways and means for the detection and
prevention of black money and bringing the same to mainstream
economy and three premium institutes.However public anger continued
on the issue , and ultimately adjournment motion was moved in the
parliament on the topic. BlackMoney deposited illegally in foreign banks
Sample Copy. Not for Distribution.
The war on cash-Demonetisation
11
Get Complete Book At Educreation Store
www.educreation.in
Sample Copy. Not for Distribution.