Indian Prime Minister Narendra Modi made an unscheduled address to the nation on Tuesday Nov. 8 stating that 500 and 1,000 rupee banknotes would cease to be legal tender from Wednesday Nov. 9 onwards.
“In this effort for development, our motto has been ‘Sab Ka Saath Sab Ka Vikas’: We are with all citizens and for development of 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,” Modi said in his address.
Modi, who is nearing the halfway mark of his term, took this step as an attempt to fulfill his election promise of curbing tax evasion and recovering illegal income, which is commonly known as black money.
Global Financial Integrity, a nonprofit research financial group, estimated that India lost 344 billion rupees in illicit fund outflows between 2002 and 2011. With this new policy, India will withdraw high-denomination banknotes in the nation’s biggest crackdown against corruption and counterfeit currency in nearly four decades.
“Black money and corruption are the biggest obstacles in eradicating poverty,” Prime Minister Modi said.
The removal of the high value rupee follows another attempt at removing corruption after India raised nearly 10 billion rupees through a tax amnesty for Indians to declare their hidden income and assets. This is to expose and penalize those holding huge amounts of cash they could not account for, primarily money on which taxes have not been paid for. The black money was commonly found in the 500 and 1,000 rupee notes.
Modi stated in his address that militants operating against India were fabricating and using fake versions of the 500 rupee note, which is presently worth around $7.55 at current exchange rates.
“Terrorism is a frightening thing, but have you ever thought how these terrorists get their money? Enemies from across the border have run their operations using fake currency notes. This has been going on for years and needs to come to an end,” Modi said.
Anil Adoor, Chief Coordination Editor at Asianet thinks Modi did the right thing to combat corruption by saying, “someone in this world has to take a bold decision, and that is exactly what Modi did,”.
“The key takeaway of this move is that through certain sacrifices, gains will come. This move may cause some flux in the economy for the common people, but in the long-term run will only prove to be beneficial to a country with the potential to be the best the world,” said Adoor.
Arvind Kejriwal, the present Chief Minister in Delhi and Aam Aadmi Party Chief (AAP), has his doubts about the demonetization of the rupee notes and what turmoil it is presently causing to common people along with his “corporate friends.” Kejriwal says, “it is beyond our understanding as how corruption and black money can be battled by introducing 2,000 rupee notes in place of the outgoing 1,000 rupee notes.”
Kejriwal isn’t the only political leader who has his doubts. The Communist Party of India-Marxist (CPI(M)) and Congress have voiced their opposition to the currency demonetization and black money crackdown.
Prime Minister Modi may have to pay a political price. Those residing in India have exhibited remarkable patience with this new ban, but only on the promise that it will actually accomplish what Modi says it will. This all depends on whether the bills circulate into the banks of India on time. The government is attempting to distribute the new notes to the public, but the lines and frustration of the public are growing.
Businesses have been at a standstill by lack of bills for routine transactions, and as many party leaders have predicted, the currency ban brings a concern that the economy will go into a recession.
Kochumol George, a business owner in Kerala, India had mentioned her store has had a lack of customers due to the fact they were unable to switch notes at the local banks. “I understand the ban is to help the common people, but if they can’t access the bank, how can that happen?”
If the inconvenience of what this currency ban continues, the support for Modi could turn into fury and damaging the promise Modi made to his people — the promise of jobs and economic development.