Curbing black money through demonetization
It's rare for the head of a Government to personally address the nation and declare as illegal tender, currency notes of certain denominations. Yet in a surprise move, Prime Minister Narendra Modi did just that on November 8. On the face of it, the declaration as void of currency notes of Rs1,000 and Rs500, is an executive decision and could have been made public by the Union Ministry of Finance. If Prime Minister Modi decided to break the news to the people, it was with a purpose: To hammer home the political point that the Government walked the talk on black money. It was to impress upon the people the gravity of the situation arising from the rampant and menacing growth of a parallel — or black money — economy in the country and the Government's commitment to tackling it through bold measures that may cause temporary inconvenience but have long-term benefits.
Going by the flurry of positive reactions from industry, commentators and the public at large, Modi has succeeded in his mission. The move must be seen as another element in the Government's larger game-plan to fight the proliferation of the black market economy. It comes in the wake of the formation of a Special Investigation Team to tackle the issue, the various agreements India has signed with individual nations to share information and take action against black money stashed by Indians abroad, and the most recent Income Declaration Scheme that netted more than Rs65,000 crore of black money within the country. All of these have happened in the last two years or so of the Modi regime assuming power.
True, there are the sceptics who find the latest decision as nothing more than drama, but they are few. And even among them, there are those that are willing to give the Government the benefit of doubt and are ready to await the outcome before passing a final verdict. It is a fact that a major portion of the black money in circulation derives oxygen from the large denominations. The parallel economy is also both a source and symptom of corruption — another issue the Modi Government has committed itself to containing. The Government will now hope that this initiative will help the country fare better in the global ranking on corruption, Despite its success in providing clean governance, it could barely draw solace from the revised ranking, which placed India 76th, only a shade better than its earlier 100th place. Poor rankings scare away potential investors and can impact the Government's ambitious projects such as Make in India.
The decision to do away with the currently in circulation notes of Rs1,000 and Rs500 and replace them with a freshly designed Rs500 note, as well as to introduce Rs2,000 note, also has to do with another related menace: Terrorism. Terror activities within the country are funded also by large sums of counterfeit currency.The withdrawal of old notes is designed to deliver a body blow. The Government must now ensure that the new high denomination notes don't end up being similarly used. Finally, with various Assembly elections (where black money is in full flow) round the corner, the decision should hopefully check the menace in electoral politics — though this alone will not reform the system.