GOPIO welcomes the bold move by the Government of India to demonetise Rs. 1000 and Rs. 500 notes, making these notes invalid in a major move to combat black money, fake currency and corruption. Demonetisation is the act of stripping a currency unit of its status as legal tender.
Demonetisation is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.
Prime Minister Narendra Modi on Tuesday had announced that Rs 500 and Rs 1,000 rupee banknotes would be withdrawn from circulation at midnight on 9th November 2016. The people can deposit the old notes at bank or post office accounts without any limit from November 10 till December 30. The Reserve Bank of India will issue new currency notes of Rs 500 and 2000 from November 10 onwards. These notes will have new design.
As of now both old 500 Rs and 1000 Rs notes have been probabilistically devalued. For anyone in middle class and below the value essentially remains the same, however for anyone holding large number of notes, the value has been significantly lowered by approximately 10 to 20% considering when the money gets deposited, there would be an income tax due on it. The Indian Government has ensured that this money is deposited or converted in banks. Thus ensuring that all counterfeit notes are caught and people hoarding cash to skip paying income tax are forced to put the money in circulation. India the seventh largest economy in the world, is overwhelmingly a cash economy, with most of its currency stored in 1,000 and 500 rupee notes.
Prime Minister Narendra Modi’s surgical move is not only to counter the fake money circulating in the system and to stop the black money but to stop terrorist funding as well. The investigation by relevant agencies reveal that many terrorist outfits are hoarding big denominated currencies to fund their terror activities. Gopio certainly hopes this surgical strike by India will stop all these menace.
Indian governments have demonetised currency notes in the past as well. According to the RBI, Rs 1,000 and Rs 10,000 banknotes were demonetised in January 1946. Banknotes for Rs 1,000, Rs 5,000 and Rs 10,000 were reintroduced in 1954. Rs 1,000, Rs 5,000 and Rs 10,000 were demonetised again in January 1978. Now, India is doing this brilliant exercise again after 36 years.
There are many countries in the world who have done the same, including Malaysia. Malaysia had demonetised the RM500 and RM1000 denominations in the past.
Although India is among the fastest growing economies in the world, it is also ranked close to 66th in terms of global corruption perceptions. GOPIO believes that this demonetisation would contribute towards strengthening the Indian economy significantly.
GOPIO Information Bureau.