While the world is still coming to terms with Donald Trump as the President of the United States, Asia has been rocked by a sensational move made by the Indian government.
- On 8th November, late in the evening, the Indian Prime Minister Narendra Modi revealed a ‘masterplan’ to curb corruption. He declared that all Indian currency in denominations of 500 and 1000 rupees (which are the most frequently used) is banned.
- All citizens would have to deposit the cash the have in the nearest bank, which would then give them the new currency notes in exchange. 9th November 2016 onward, citizens have been rushing to banks to exchange their old money for new currency notes!
- As several Indian businessmen and politicians have hoarded black money through cash, this overnight decision means that all of the black money is nothing more than bundles of paper now.
For those who think that corrupt businessmen and politicians can deposit their hoarded cash in the bank and easily get the new currency, here’s the deal breaker: All the money henceforth deposited by citizens into their bank accounts will be scrutinised by the government. People who deposit suspiciously large amounts of money, especially when their bank account has otherwise not had much credit, will be questioned. If the person is unable to adequately explain, through documentation and such, how they earned the money, then they will be heavily penalised. Not only will they have to pay tax on the excess and unaccountable money, they will also be charged 200% penalty fee. In short, they will be left poorer than before!
Many believe this is a historic moment for India, which is otherwise notorious for having corrupt officials. Modi’s move to ban currency notes overnight, and to issue new currency, is a huge war on black money in India. Many feel this is the beginning of change for the country, and era that finally ends corruption.
— Manak Gupta (@manakgupta) 10 November 2016
Narendra Modi currency ban to boost India budget by three times of Iceland’s GDP https://t.co/pJ0SKDmHEX
— हम भारत के लोग (@India_Policy) 10 November 2016
— Dr Rikin Gogri (@dr_rikin) 8 November 2016
How does this affect the Indian economy? India already has one of the world’s most populous and young workers, and with Narendra Modi’s move to eliminate black money, India could very well be on the path to becoming a developed country soon.
We will now have to wait and see how this move by the India goverment affects global markets, and what it means for India’s trade partners. However, it is safe to say that this single masterstroke could probably wipe most most of the money passed on through corruption! Like many say, the 21st century is truly an Asian century!