Did Modi’s BJP really start transferring the 500 and 1000 rupee notes before the PM’s speech?

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Apna Sapna Money Money

Well, what is money? Money is actually an instrument. Check a hundred rupee note, and on the bottom left you can find a message written in small letters, ‘I promise to pay the bearer the sum of one hundred rupees.’ Signed by the Governor of the Reserve Bank will be printed under that. It means that the Reserve Bank’s chief promises to give you a hundred dollar property. But, the question is whose property is it that is being given? It is the property of the country. The document that you have is called “the money”. Higher the amount of money you have, you gain the right to own more property. The Reserve Bank is the trustee or trustees of the estate. It is responsible for the proper maintenance of the property. It must be remembered that assets are constantly moving. When the amount of money that moves in the market increases, the import-export traffic will increase, and the property will increase. In short, they say, money leads to more money. So transactions without proper channel or by not making it visible to the bank to evade corruption is wrong. Even keeping more than legally allowed money stack with you is also wrong. Because that money is stuck as stone. Then what is classified as black money? It is the property, which you don’t own but you are sitting on it. If you have earned money through legal ways but refused to pay the correct taxes on that earnings, that is also black money. Another term that is popular now is counterfeit currency, what does that mean? If you have the document of property that doesn’t even exist, that is termed as counterfeit money. Now, moving on to the main topic.

What did Modi announce?

He announced the demonetization of Rs.500 and Rs.1,000 notes currently in use.

Why has this scheme been introduced?

There have been increasing number of incidents recorded of fake Indian currency notes of higher denomination. For a lay man, the fake notes look similar to genuine currency notes, even though no security feature has been copied. The fake notes are used for anti-national and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash-based economy hence the circulation of fake Indian currency notes continues to be a menace. In order to contain the rising incidents of fake notes and black money, the scheme has been introduced.

Why this way and not any other way?

Despite possessing legal earnings, Indians (mostly in rural areas) accumulate their makings either at their home or lend them to the nearby surroundings. Even in the 21st century, when banking network has spread more or less in every small area, money lending, the oldest form of business, is still effective in many areas. This is not only affecting the registered bank’s business but also money transactions are made without being recorded in the bank. With these changes, people who have a lot of legally earned cash in their pocket or at home, will have to deposit it in the bank before the date proclaimed by the government (30-Dec-2016). As it is legally earned money, it will surely be deposited in the banks and this will let the banks house surplus amount and margin as well. Now, talking about black money basically found in large digits i.e. crore or more. It undoubtedly contains INR 500 and INR 1000 currency notes acquired through unrecognised or illegal ways. There is no option other than to be destroyed or to be deposited. However, in order to use the second option, they have to disclose it as legal income and have to pay heavy tax on it. So, how can they make it possible with these legal boundaries? No matter the option they choose, if they found a way to make their income legal or they just get frightened, they have to pull out all the money that is not under the account of Indian government. Later on, it will help to minimise the total currency circulation in the Indian market. As the currency circulation will be reduced, the inflation rate will also become negative, it is known as deflation. Although, deflation leads to unemployment problem, it increases the internal value of money as well. However, it always circulates with time and demand. So, based on the increase in demand, the chances of employment and inflation will also be enhanced proportionally. They always balance out each other on some level. But it will take a bit of time. Based on the Business Standard report, currently Rs 17, 54,000 crore worth of notes are in circulation according to the RBI’s database on the Indian economy. Of this Rs.500 notes constituted almost 45% of the currency in circulation while 39% of the notes were of the Rs.1,000 denomination in value terms. However, in terms of volume, Rs 10 and Rs 100 notes constituted 53% of the notes in circulation. This measure would mean that from midnight, almost Rs 6, 32,600 crore in circulation in the form of Rs 1,000 notes would be illegal tender. To replace them, Rs 2,000 notes would be introduced, which according to the government would be limited in circulation. RBI data shows that in 2015-16, almost 6.5 lakh counterfeit notes were detected in commercial banks of which almost 4 lakhs were in the Rs 500 and Rs 1,000 category. It is in this context that the government wants to re-monetise the 500 rupee note while de-monetising the 1,000 rupee note. But, the number of Rs 100 counterfeit currency were also close to 2 lakh this year.

Issues and political views

As it is a sudden announcement, and most people were not prepared for it, we saw lots of chaos among people. The main sufferer were daily labourers. Daily labourers get their money from the contractors, who keep hard cash at their disposal for these payments. Overnight all of these cash became useless. At least for the next one week we are expecting to see this chaos.

The next set of people impacted by this change are patients in hospitals. There have been reports from all over India about patients not getting treated due to lack of valid money, and that too in government hospitals. Now, the issue is not that they are not accepting 500/1000 notes, the question is why. As per the declaration, all government hospitals are bound to accept the currencies, but they are not doing so. As usual, here politics is coming before the patients. Most government hospitals are state run, and they generally work as per the state government’s (through unions) beck. What is happening is petty politics (which as per law is illegal) on someone’s dead body.

A new business has already started, give 500 notes and get 400, give 1000 notes and get 800. Everybody is talking about this and sharing on facebook as well, but nobody is lodging any complaint because everyone is doing that. Today Arvind Kejriwal also was talking about the same, the black money continues to stay as black money only. First of all I want to say after a long time, in today’s video he talked some sense most of the time, other than left and congress, who are only talking about how market will halt for 2-3 days, they forgot that for their strike, market suffered more than this. Now coming back to money exchanging in black market, I haven’t see anything personally but I believe this is happening, and I heard from multiple people through facebook. Even if that is happening, what would happen to all those notes? Today or tomorrow, these notes coming back to bank anyway, may be not through proper way, may be no one will be arrested, there won’t be any proof. It will come in small small amounts, but it will come, and that is required, it will be no more black money.

There are lots of flaws in the system, but no opposition parties are talking about that. They are talking about only the non issues, poor people will suffer. Poor people who? How much they have that they need to suffer? Poor people don’t have bank accounts. Why is that? Only about a year back the government started opening bank accounts for everyone. It takes only 15 minutes to open an account. With such ease, who doesn’t have an account? And whose fault is it if someone does not have one?

The bigger issue is government declared that nobody will be spared, whoever depositing hard cash will be tracked and could be penalised upto 200%. This statement actually opened the above money laundering market. If the government would have taken back money with 50% tax, nobody would have any problem. Now the question arises as to why the government is taking this hard decision? As per any BJP supporter this is what government wanted – to teach the black marketer a lesson? No dude, they wanted the money to comeback that’s all. And that’s not bad, but that is one of the toughest decisions that have been made in recent times. But they didn’t want to teach anybody any lesson, they also wanted to open up some laundering scheme. Do you think BJP members don’t have any black money? How would they make it white? If government opened up with 50% tax payment, everyone could have taken that door, and the laundering market wouldn’t have been born. But then how would the BJP leaders declare their cash? One or two would get caught by some or the other reporters. The same applies to other parties, they also need to en cash their black money. Even though they are talking about the business, they are not coming up with any proof or filing any report officially.

Today one of my friends shared another news that reported in ganshakti regarding the cash submission by BJP in their Indian Bank account, central avenue branch. As per the report, BJP party has submitted 500 and 1000 rupee notes to the branch, along with bank details like IFSC code and branch code. As usual I asked them to show me the proof, if you have because it is a big news. Also I asked him to file a RTI to get all the data, as statement doesn’t show the denominations submitted. Once I got hold of a photo of the statement I saw that the branch code is wrong. When I enquired, he said that he would check but confirmed that it is authentic as it came from a good source. I did a little bit research and what did I see? The branch code printed in Ganashakti (which is correct), doesn’t match with the statement they are sharing (in second link). They didn’t even check that much and started dancing.

Now coming back to new notes, as everyone is questioning if 1000 rupee note has been stopped, why introduce 2000 rupee note, isn’t it again creating the same issue? Exactly that’s my question too, but we can’t say for sure that how secure new notes are, we have to wait and watch. But the problem people are not talking is that high denomination currency brings inflation. US doesn’t have more than $100 bill for public use. Similarly, Euro has a maximum of 500. But if you travel through Africa, you can see high denomination currency due to their currency value, and that is not very good thing for sure.

Result

Will this sweep all the black money? No, as you have seen the way things are happening, it won’t sweep black money marketing, but, the money will be channelised, and come under the control of Bank. Many people already started burning notes, how to handle this? No issues, RBI has the count of how many notes are there in the market. If after a certain time, the old notes don’t comeback, still RBI knows how many they have to print and circulate.

As I said earlier, it won’t remove the black market, but they have to take high loss and channelise money, but this will leave a huge impact on fake currency market for sure. Currently, they are in big shit.

Will this change remove all the black money, is this the last step? No, this should just be the beginning. The affected people here are rich farmers who buy Mercedes on down payment, but don’t declare the income. This will affect the big time money lenders who drink the blood of farmers and small scale poor people. This change wont affect large scale corporates who have everything converted into jewellery, property or money deposited in Swiss banks.

The next step would be attacking real estate, jewellery businesses, and foreign banks, and I am expecting that soon.

 

Sources:

Indianceo

The Hindu

Ganashakti

Facebook  (Many thanks for his post on black money in layman’s term)

Business Standard

Najarbandi

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Abhinaba Basu

Software Engineer at Oracle, occasional photographer and blogger.

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