If you follow the news at all, be it through Social Media, Television or the Internet, chances are that you already know something about PM Modi’s latest move against black money. In deciding to take out all the 500 and 1,000 denomination notes that are currently in circulation and replacing them with fresh issuance, the government is basically wiping the slate completely clean. Apart from strengthening the economy — Yay!! — the move is also likely to provide a boost and propel cashless systems of transactions in the country.
Before delving deeper, lets take a quick look at the decision and how it helps the economy.
In an unplanned address to the nation today, PM Modi stunned everyone by announcing that all existing notes of denominations of 500 and 1,000 will cease to be legal tender after midnight today, that is, in a couple of hours.
The process of cash circulation is directly related to corruption in our country impacting the lower classes of our society. There is a time when you realize that you have bring some changes in society, and this is our time to feel the same.
People have been given a window between November 10 to December 30 to deposit notes of Rs 500 and Rs 1,000 in any bank or post office to get them replaced and out of circulation. And since you are required to carry an I.D. proof with you, chances of folks, who have hundreds or thousands of these notes stashed away in secret places carting them to the nearest post office or bank is pretty low — since an accounting is almost certain to follow. This will leave unscrupulous people with loads upon loads of black money with just so many stacks of worthless paper.
On the other hand, the RBI — which needs to ensure that a certain amount of money remains in circulation at all times — will find itself able to issue more money. Also, with so many large denomination notes out of the circulation for good, the economy will be strengthened. And lets not even talk about people with fake currency on their hands. With people no longer accepting these notes — and they cant exactly go to the banks with a sackful of counterfeit notes either — the Indian economy is likely to receive a huge boost.
And this is exactly where cashless comes into play. The Modi Government has always been a proponent of cashless transactions. Why? Well, for a couple of extremely important reasons.
First of all, cashless transaction are very traceable. Every transaction you make online is usually done through a bank or through a third-party service such as Paytm. With that said, it would be extremely easy for the government to note down any discrepancies between a person’s actual income and his/her transactions and to follow up with investigations.
Also, where are folks with black money upon their hands going to store it if an economy goes cashless? After all, it is extremely easy to follow the flow of money
Next, maintaining an economy that has cash at its center is very hard — and expensive. You wont believe how much ink and paper can cost. The RBI’s printing presses incurred expenses of as much as Rs.4,700 crore, mainly owing to the cost of paper and ink. That is equal to the gross GDP of some of the states in the country! With Cashless transactions as the main mode of transfer.
Here’s what Ola’s Bhavesh Agarwal has to say,
We welcome this landmark move by the Hon’ble Prime Minister. As a nation, this is our first major step towards a cashless economy, bringing convenience and transparency for every Indian. This move is integral in realising our shared vision of a Digital India.
PM Modi’s latest announcement is huge. The currently incumbent government had already suggested a bevy of measures such as tax breaks for consumers and merchants using cashless modes such as credit/debit cards while transacting, lower transaction fees for electronic payments, imposition of heavy taxes on cash payments above a certain value right after coming into office. It has now wiped the slate clean of a major portion of counterfeit notes and black money.
Speaking on the condition of anonymity, an RBI insider told The Tech Portal:
The decision is focused more towards curtailing black money and counterfeit notes. However, cashless transactions may well receive a boost during the transition period.
Once this scheme is fully implemented, we can also expect the government to make further moves towards taking the economy in a cashless direction.