The recent unanticipated decree by Prime Minister Modi to demonetised higher denomination notes of Rs 500 and Rs 1000 by making it out of circulation is a welcoming move to curb the ever increasing phenomenon of “Black-Money”.
The reasoning behind this scheme is that, In our economy there is 600 crore Rs 1000 and 1600 crore Rs 500 notes are in circulation, that constitute nearly to 85% of our economy. Now, imagine that 40% of that 85% of money is in holding by public because of tax evasion or money laundering or bribe etc, then that money is stagnant, is of no use, not to me, not to you and not to our economy, that money just stacked idle. By demonetising such currency, we are going to bring those unused or unaccounted currency back to our money circulation, which could be used further in the development of the country etc. There will be problems at hand for few days like businesses will come to halt for a while, people will be short of money, but we must support our government on this endeavour for a transparent and better economy.
But there are some questions to be answered, such as, the cost of this whole demonetisation is around 15k-20k crores will that be equal to the gains we are going to have? There has been instances earlier when demonetisation happened in India, in 1946 and 1978, when the 5k and 10k notes become obsolete, but it had failed to achieve its objective. If the new income is unaccounted, will that not be hidden in the form of Rs 2000 note? How is demonetisation of higher denomination notes is going to serve if a new higher or same denomination note is introduced? Government must explain these intricacies.
For now one thing is clear that the inflation curve is going to shift down a little, so the “mahengaii” is definitely going to come down. And its effect is visible in real estate sector. There is a 30-40% reduction in its prices. Because earlier builders used to take 60-70% through legal ways and rest through illegal ways, to avoid taxes and charges. The trouble is greater for those babu’s you must have encountered with in government offices who asks money(bribe) for every little and free things or those businessmen’s who stock up money in their homes and offices are the worst hit. The happiest man in this country right now is that common man who has nothing to hide.
But the million dollar question is that those big fishes, whose income are stacked in Swiss accounts will come to the rail of corruption free India? And the government must review that recently which companies has launched billion dollar venture or were distributing free internet or distributing free bonuses to their employees must come to scrutiny. I am hopeful that income tax department is watching.