Team-BHP - Government scraps Rs 500 and Rs 1000 notes!

Even if this move does not eradicate black money (Because mentality of people will not change, they might be figuring out different ways to accept bribes going ahead) , just the massive blow it has dealt to the counterfeiting industry across the borders is alone worth the discomfort the common people might experience for a few days.
This was brewing for a few days, with the prime minister exhorting people to open bank accounts under various schemes all part of the complex jigsaw puzzle.
Brilliant, brilliant move.

Quote:

Originally Posted by hybridpetrol (Post 4089465)

I mean, think about it - if the new Rs.500 and Rs.2000 are already ready, it cannot be printed by PM alone. It should have been printed at factories in the last few weeks / months, where employees like you and me work. The notes should have been packed transported to different cities all over India by road / rail / air, where people work at packaging, loading, shipping, unloading, and unpacking. This network of people who has known the information has guarded the secret, and played a big role in catching the black money holders by surprise.

Currency note design keeps changing every now and then and old notes are removed out of circulation in a phased manner. Nobody would have guessed that old notes are being demonetized all of a sudden like this. They would've just thought that new design is being implemented and printed.

The below quote from "The Dark Knight" comes to my mind, considering the current Black money scenario!

Quote:

Harvey Dent: It won't matter. The head guys make bail, sure... but the mid-level guys, they can't, and they can't afford to be off the streets long enough for trial and appeal. They'll cut deals that include *some* jail time. Think of all you could do with 18 months of clean streets.
[the Mayor waves Gordon and Commissioner Loeb out]

Source: IMDB

Of course, the top guys will sooner than later will figure out ways to continue their old ways of corruption and hoarding black money. But for politicians with less power or officials and middle / low level businessmen, it will take quite a long time to figure out how to make the system accept and work with black money. With their existing "Savings" going to be accounted or trashed, they have to begin from zero.

Something I don't understand.

Traders are not doing any cash business today, because they don't want to accept Rs 500 notes. Why are they losing business even for the time it takes us to get new money or smaller denominations? After all, they can deposit the money in the bank for quite some time yet, and while they may not have been paying all the income tax due, I find it hard to believe that they were paying no income tax all.

Random thought, but wouldn't limiting circulation of higher-denomination notes, both by volume and validity (expiring current notes anyone?) be a much more practical long-term solution?

Currency with a fixed expiry would automatically limit the duration it can be kept out of circulation/reporting, or so one would think.

Quote:

Originally Posted by comfortablynumb (Post 4089368)

Folks who are in the business of black money now, will definitely find ways and means to do it eventually with the new high denomination notes - if not in a year, then maybe 2-3 years down the line onward - right? Or am I missing something?

Vikram,

Exactly the doubt I have! Its only a matter of time before people start hoarding again (with the new notes) and Babu's start demanding bribes again (with impunity) to make good all their losses.

Quote:

Originally Posted by hemanth.anand (Post 4089383)

Let me put it in simple terms.

Generating black money now will be tough with so many processes and restrictions in place and also because these notes will be printed in limited numbers. People will be forced to go cashless.

Hemanth,

Yes, what you are saying does make sense. But, are you sure about the fact that the new notes will be printed in limited numbers? I thought that the initial restriction on cash was only because of production/logistics constraints. Eventually money printing will return to full swing. Is my understanding wrong?

In summary, while I hail the move and believe that
1. It will help eliminate fake currency.
2. It will reduce the value of undeclared, hoarded wealth to zero
3. Will instill fear that this can repeat

Although point 3 will dissuade black money generation (with new high value currency notes), I am not sure to what extent it will be successful. Would appreciate if someone can share their thoughts on how this will prevent future blackmoney generation and help us become a cashless economy.

Quote:

Originally Posted by prasadee (Post 4089268)

I consider the Rs1000 notes I have with me as a donation to the cause of black money eradication :). I called SBI California, they do not accept/exchange INR. I do not have any planned travel to India till next summer. Planning a trip earlier to exchange couple hundred $s makes no sense.

INRs can always be exchanged for local currencies. There will be some conversion charges, but I think that can be a way to go if there aren't better alternatives. For couple of grands, conversion charges shouldn't be too much anyways, not sure why would anybody stash larger sums in INRs at foreign land.

Quote:

Originally Posted by naut (Post 4089561)

Below I'm quoting from the PM's speech yesterday. He did mention that the share of higher denomination will be limited. Read the bold part in the quoted text below.

Quote:

From time to time, based on currency needs, the Reserve Bank with the approval of the Central Government brings out new notes of higher value. In 2014, the Reserve Bank sent a recommendation for issue of 5,000 and 10,000 rupee notes. After careful consideration, this was not accepted. Now as part of this exercise, RBI’s recommendation to issue 2,000 rupee notes has been accepted. New notes of 500 rupees and 2,000 rupees, with completely new design will be introduced. Based on past experience, the Reserve Bank will hereafter make arrangements to limit the share of high denomination notes in the total currency in circulation.

Quote:

Originally Posted by hemanth.anand (Post 4089579)

Below I'm quoting from the PM's speech yesterday. He did mention that the share of higher denomination will be limited. Read the bold part in the quoted text below.

Thanks Hemanth! Looks like they have a plan for it.
Lets hope this ends the era of black-money for good!