It’s the biggest nightmare for many black money holders. Prime Minister Narendra Modi came out full throttle with a major decision to end black money corruption overnight by banning the biggest currency denominations of India. 1000 and 500 Rs notes has been demonetized and will not be a legal tender anymore.
This was the second major attempt by our defiant prime minister to curb black money menace. Prior to this, Modi tried a more liberal way of exposing the parked money a few months back through his Radio show Mann Ki Baat. It was promised to black money holders that if they declared their undisclosed wealth by a stipulated time, no actions would have been taken against them by the Government.
The idea worked, but not so much.
Why something like this was much needed?
Politicians fill their war chests to fight upcoming elections. Outlaws carry out their daily transactions with nothing but counterfeit money. Businessmen – mostly jewelers and real estate – choose to minimize their banking transactions in order to avoid taxes and disclosing of the humongous amount of assets they hold.
In short, the country has a vast amount of cash that is unaccounted-for. Corruption resides on top of a tower that is built with black money.
A step like this results in the reduction of cash transactions to the minimum, thereby leaving no room for black money. And, studies have also shown that corruption can be curtailed big time if cash transactions are reduced.
A master stroke by Modi
Not minutes after the PM declared the breaking news of banning 500 and 1000 rupee notes, places like malls, gas stations, jewelry stores saw a huge rush of buyers. However, this is the scenario of a panicked mass that comprises of nothing but genuine citizens who also happen to save cash for unpredictable financial exigencies.
For real black money holders, there is no way out. New rules for exchanging banned denominations are quite stringent and it would be simply impossible to move out large amount of cash in any form.
“It will be disruptive, it will be inconvenient, but in the medium term, it will be very good.”