For the first time since the country gained independence as its own democratic nation, the prime minister of India has implemented drastic and necessary measures to fight the country’s rampant corruption.
In early November, Prime Minister Narendra Modi delivered a 40-minute speech introducing the rattling change to Indian currency. Modi outlined that 500 rupee notes (approximately $7 U.S.) and 1,000 rupee notes (approximately $15 U.S.) of Indian currency will, overnight, no longer be legal tender. The prime minister also stated those who possess the newly-banned rupee notes could visit banks to exchange for smaller notes or the new 500 and 2,000 rupee notes.
Much of India has not only accepted this drastic measure in the fight against corruption, but also supported it in raves. Modi made it as clear as possible in his reveal speech that the targets of this law will be the rich, not the middle or the lower classes.
Modi outlined this plan was — most importantly — an effort to devalue “black money.” Black money is cash the owner has not payed taxes on and therefore does not show as income or is simply obtained illegally. The Institute for the Study of Labor reports black money constitutes between 21 and 26 percent of the Indian GDP — a huge problem.
Modi continued on to reassure Indian citizens that terrorism would also be severely affected by the monetary changes.
The Economic Times reported that Rajnath Singh, the Home Minister of India, stated this is, in fact, an attack on terrorism. Terrorist groups throughout India have been found to use fake 500 and 1,000 rupee notes printed in Pakistan to fund their ventures.
Though the original action received acclaim from the populace, the country suffered from inevitable logistic issues. In the first few days, many ATMs were unusable, as they had to be fitted with the new 500 and 2,000 rupee bills.
Many have flocked to banks to exchange their now-worthless notes, enduring lines that took nearly 4-5 hours to exchange the max amount of 2,000 rupees (which will increase to 4,000 rupees on Nov. 24).
Since the first week of this measure’s implementation, sources have reported significantly decreased bank and ATM line lengths.
If one has a large sum of cash on hand for any explainable reason: weddings, hospital bills, business reasons, etc., they must exchange their money or redeposit it into their bank accounts by Dec. 30.
The middle class and upper middle class are largely unaffected by this banning due to the fact that they use the banking system to store their money, and are not keeping much cash at any given time. The poor, on the other hand, have suffered from the fiscal changes.
Poor Indian citizens tend to keep their small fortunes in their homes, in cash, and for those living rurally, it is difficult to travel to banks or ATMs due to transportation and cost-related reasons. If they are able to reach an ATM or bank, they will have to wait in line for multiple days to exchange the full amount if it surpasses 2,000 rupees.
Aside from horror stories of elderly citizens who died while waiting in line to exchange cash and citizens who committed suicide for reasons related to the rupee ban, the country stands behind its decision. India has embraced the hardship of exchanging their notes in the hopes of flushing out tax evaders and fighting the age-old problem of corruption.
There are some predicaments for the everyday person during this change, but the positives are incomparable; especially for the government, and ultimately, for its people.
Firstly, there are a large number of fake 500 and 1,000 rupee notes in circulation (estimated to be in millions); these notes will now be entirely worthless, saving the government a large sum of money. Secondly, those with large amounts of black money will not be able to exchange their cash; this will reel in millions for the Indian government.
According to BBC, Bill Gates views Prime Minister Modi’s move as bold but important in order for India’s society to move away from the black market economy and toward creating a more transparent economy. Gates also projected India will become the world’s most digitized economy in years to come, and that this move will directly aid that progress.
India’s economy is mostly cash-driven, with most of the country handling their everyday purchases in cash. This accounts for the majority of the cash flow in the country, making said transactions practically untraceable.
Now, many are forced to deposit their money in banks, which will increase cash flow within the banking system. This has already proved monumental as interest rates are dropping nationwide. Economists are projecting the rupee banning will lead to a growth in the GDP and provide banks with increased lending power.
The prime minister explained a change as drastic as the rupee ban required secret planning for nearly the past 2 years in an effort to keep it hidden from members of the Indian government and parliament — seeing as many members are holders of black money themselves. Prime Minister Modi promised the ban is only the first of many more anti-corruption measures to be taken in the country’s future.
News outlets have mainly reported on the negative effects the Indian citizens have experienced and proposed the transition would have gone smoother had the banks been notified earlier than they were.
Considering the level of secrecy required for the prime minister to execute this action, this is a ridiculous proposition. India Today reported the prime minister worked closely with the Reserve Bank of India’s Governor, Urjit Patel (the equivalent of the United States Governments’ Janet Yellen).
India’s current situation calls for citizens to truly show their patriotism through action. We live in an age when patriotism is equivalent to sharing a post on Facebook; but it is now time for all Indians to stand behind Prime Minister Modi’s action that required an incredible amount of guts, planning and courage to implement.
Modi has, almost single-handedly, sent corrupt politicians, government workers and holders of black money into a frantic panic. This is beyond commendable.
Though this plan is not without its execution faults, the citizens of India have poured in their praise for the radical, but necessary measure of demonetizing these notes. In the long run, Modi’s actions are projected to have more of an effect on black money and the black market economy than any other anti-corruption method implemented in Indian history.
This theatrical measure will change the Indian economy in more-than-subtle ways in the near future.
Sriteja Yedhara, Contributing Columnist
Carson McNamara is a senior in Communication Arts who loves contributing to narratives through Editorial Illustration. She drinks a lot of coffee and reads a lot of books for toddlers.
Facebook | Portfolio | [email protected]