Prime Minister Narendra Modi announced the demonetisation of Rs 1,000 and Rs 500 currency notes with effect from 12 am, 9 November 2016, practically giving no one any notice or clue of the impending move. While the economy grew by 30 percent between 2011 and 2016 and currency notes in circulation rose by 40 percent, the circulation of Rs 500 currency notes grew by 76 percent and Rs 1,000 notes by 109 percent said Economic Affairs Secretary Shaktikanta Das — a clear evidence if one were required of fake currencies being introduced into the system by terrorist outfits and countries inimical to India.
While the move should send fear down the spines of people with unaccounted cash and halt the counterfeit producers of these denominations in their tracks at least for the time being, it would not affect those who have been parking their black money in real estate and gold, the two assets that have been defying crackdown. They would look askance at their brethren who innocently piled up unaccounted cash.
Banks would witness a surge of deposits of cash in these denominations from 10 November to 30 December the time given for one to do so. One can count upon honest people to avail of this facility because crooks would fear inconvenient questions especially if the deposit is large or in steady trickles.
Crooks especially the well-heeled moneybags would seek the sanctuary of political parties registered with the Election Commission of India because they (political parties) enjoy an immunity which no one does — no need to account for small donations i.e. Rs 20,000 and less. How convenient! Political parties might oblige their patrons — accept donations or pretended donations from them in these denominations which in turn can be disgorged by the political parties in bank counters or accounts without any fear of being challenged by the taxman to whom the smug reply would be they were small donations, period. The pretended or sham donations can be gotten back through several means duly camouflaged as regular transactions by the political parties playing footsie with the crooks. One wishes the Prime Minister had in his speech simultaneously announced the wrenching away of the small donation alibi from political parties.
Ditto for religious trusts that are chock-a-block in this country. Religious trusts too do not fear the taxman because their income is exempt from tax. Dubious religious trusts have been helping crooks launder their black money. This time round too they may play the handmaiden role by accepting the disagreeable currency notes and presenting themselves before the bank counters or depositing them into their bank accounts.
Crooks might also use the exchange counters open from the 10 November 2016 till 25 November 2016 to the hilt. Banks would be opening these counters, and one can exchange the demonetised notes in favour of those that are legal tender. The limit is Rs 4,000 per person subject to production of identity proof. The limit of Rs 4,000 might make them run errands to several banks spanning the entire fortnight during which the facility is available. But so what? Aren’t they indefatigable? To fool the CCTV cameras, they might not expose the same person to the same branch again and again!
Industrialists might also be tempted to rope in their fawning and obliging employees. Each one might be handed over a tidy sum that does not arouse any suspicion so that she may deposit it into her bank account before 30 December 2016. She dare not appropriate it as her own because employers know how to get the money back later on in currencies that are legal tender. The beauty of splitting of income, as well as stash of prohibited currency notes among several people, is they pass muster by their sheer smallness.
All in all, the move is a good one especially because it is both a frontal attack against black money as well as counterfeit money. The USA routinely demonises currency notes and brings newer versions with different watermarks and designs. That is precisely what the RBI has promised to do with the new Rs 500 and Rs 2,000 notes.
Updated Date: Nov 09, 2016 13:01 PM