Banned on Rs. 500 & Rs.1000, Pulled Black Money out of the Economy

In a decisive step to curb black money, Prime Minister Narendra Modi announced demonetization of Rs. 1000 and Rs. 500 notes with effect from midnight of 8th Nov., 2016, making these notes invalid in a major assault on black money, fake currency and corruption.

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Narendra Modi spoke on demonetization and said his drive against black money would not stop after the currency note ban. Modi said the government might introduce more steps after December.

“Black money and corruption are the biggest obstacles in eradicating poverty”. Currently India’s black money economy is about 20% of its GDP, according to estimates from Ambit Research. Apart from cash, Indians also hoard wealth worth over billions of dollars in the form of gold.

Currency circulation has been increasing at a rapid rate, especially in 2016. Till April 29, Rs 16.50 lakh crore worth of Indian rupee has been circulating in the country. This is a 15% percent increase compared to last year. Many reasons have been cited for this spike such as the five state elections and increase in gold imports using black money. More than 80% of currency circulated in India is in the form of Rs 500 and Rs 1,000 notes. And most of the fake currencies are found in these denominations. The PM’s move banning notes of the denomination ensures that all fake currency plaguing our markets go out of circulation.

The PM’s decision comes 39 days after the biggest-ever black money disclosure in which Rs 65,250 crore of undisclosed assets was declared. The government was even able to collect Rs 29,362 crore in taxes. Eleven days later, Andhra Pradesh Chief Minister Chandrababu Naidu wrote a letter to PM Modi seeking abolishment of big currency notes. Around the same time, he even mentioned that Rs 10,000 crore rupees from the Rs 13,000 crore black money that came from Andhra belonged to a single Hyderabadi individual.

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