Indian rupee gets a makeover to stop fake currency and the growth of black money

A worker at a fuel station checks a 500 Indian rupee note after filing a vehicle with fuel in Kolkata February 3, 2011. REUTERS/Rupak De Chowdhuri/Files

A worker at a fuel station checks a 500 Indian rupee note after filing a vehicle with fuel in Kolkata February 3, 2011. REUTERS/Rupak De Chowdhuri/Files

India’s fight against black money just got serious as it makes an unpredicted by scratching off the currency notes of 500 and 1000, effective November 9 12:00AM IST. The Prime Minister of India, Narendra Modi announced that there will be new 2000 and 500 circulated with a new look and design from November 10 onwards.

It is noted that in India these currencies of high value are used in committing financial fraud, corruption and terrorism. The government’s, political parties and other candidates spend crores of rupees during general elections, most of this money constitutes of 500 and 1000 rupee notes. During the general election of 2014 Rs. 30,000 was spent, when the official spending was accounted to Rs. 8000 crore.

“As of March 31, 2016, Rs 16.5 lakh crore of currency was in circulation. A vast majority of that was being stashed in large currency notes by hoarders in the form of black money earned either through corruption or ‘cash only’ transactions. Only those who have earned their money through legal means will have the courage to deposit it back into their bank accounts by the December 30, 2016 deadline. For those who have earned through illegal means will now be in a bind since their money held in these notes is as good as trash at the end of the deadline.”, reported business today.

According to the Reserve Bank of India, Rs 500 notes account for 45 pc of all notes in circulation while the Rs 1000 notes account for another 39 per cent. Nearly 16 billion Rs 500 notes and 6 billion Rs 1000 notes are in circulation currently. In one single move the government has discontinued 84 percent of the currency notes in India.

This might come a radical surprise, but since the total black money in India constitutes up to almost three times its current GDP it is about about we did something about it. There is going to be higher demand for gold and a fall in real-estate until the country get used to the new change.

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