Demonetisation means to withdraw the established currency. There can be many reasons such as control inflation, to stop black money from circulation, to stop parallel economy, to convert unproductive money to productive money etc. In the initial classes of economics, this concept is introduced to the students and that it is rarely used, we need to prepare well and a need for decision so that it leaves a positive impact on the Economy. Due to Monetary and Security reasons, the Prime Minister of India Shri Narendra Modi announced discontinuation of currency of 500 and 1000 denominations on the Midnight of 8th – 9th November 2016; thereby they ceased to be legal tenders from that time onwards. This reflects the will power to take pragmatic decision at the highest level and we expect that the Reserve Bank of India is able to deliver in time.
This historical decision led to discontinuation of large part of the money which by widely excepted estimates is 85% of the currency in circulation.
- The black money held by hoarders became useless.
- The money held by terrorists became useless overnight.
- Hawala business came to a standstill.
- Black Money with the political parties became dust.
- People who created Black money by not paying Taxes were punished.
- Unproductive money kept in houses became productive as it was deposited in the banks and got into circulation.
The honest people are feeling happy and content that at last the corrupt and black market hoarders have been punished and there is somebody who would listen and act. Another reason for happiness is that this will reduce the disparity among the masses. Due to demonetisation there are lots of problems being faced by the people but the mature voter of the Indian republic is fully supportive of this decision by the Indian Government. Almost all the political parties barring BJP, JDU and BJD are falling to the lowest level and trying to incite against this decision, but the citizens of India know what is good for them.
In this positive atmosphere people should be encouraged to maximise the use of “Rupay Card” because 80% of the currency will find its way to the banks. The main aim of the decision was to attack black money; we will have to see for how long this is effective. Black Money is created by keeping the unaccounted for money, the government is not informed about it, this may be due to tax evasion or through other illegal methods.
To defeat accumulation of fresh black money there is need to develop trust between the Government and people, the common man should have belief that his tax is not misused and top hierarchy in Government and in civil society are not corrupt and free of any scams.
A person find it hard to pay taxes on their hard earned money therefore finds and adopts ways and means to save money, but has no problem paying the indirect taxes. Government should think, analyze, and work towards making India an Income Tax Free economy, as far as Income Tax on Individual is concerned. Now considering the current Income Tax slabs save the tax money for 10-15 Yrs as Tax Account on Individual’s name. Government will have money for infrastructure development and the individual will be able to save money by default. This will neutralise and discourage the tendency to create black money.
There is a limited number of people who are in the business of making black money, government can keep track of such businesses / Individuals and bring them to justice to serve as an example for others. As we can see in the news papers and through news channels and social media, that the currency notes of defunct 500/1000 denominations are being burnt, thrown into rivers, dustbins or poor people are being used to convert the black money to white, it will be better that the government should allow a last chance to convert black money through 50% conversion rate. Some of this money can be directly deposited into the accounts of poor people. This way the poor will get some money and the rich will get some portion of their defunct currency. New thoughts, New steps , out of the box thinking sure will go a long way in stabilizing the Indian economy as most of the money will now be in circulation.