India’s economy contains a large percentage of black money circulation with an annual generation of black money of over ₹30 lakh crore which is greater than the entire amount of cash in circulation in the formal economy, thus lending the basis for PM Narendra Modi’s move to ban ₹500 and ₹1000 notes which constitute 86% of India’s currency flow. However, Modi’s revolutionary and controversial move that was announced just a few hours before it was carried out on the same day (8 November, 2016) to ensure maximum confidentiality, has received mixed responses from all sides.
The greatest criticism has been that farmers and members of the working class find themselves struggling to provide for themselves and for their families due to long waiting times in queues to exchange their current ₹500 and ₹1000 notes before they cannot be exchanged in return for the new ₹500 and ₹2000 notes after the first week of December. The death toll rate as a result of frustration over the newly banned currency has already risen to 25 just a week after the unsuspected implementation of this new policy, thus creating parliamentary disputes over the motive behind this revolutionary move that was not disclosed to anyone in Congress except a select few who were sworn to secrecy by PM Narendra Modi.
Demonetization will have an adverse effect on GDP due to its freezing of 86% of banknotes in value terms – Indian National Congress
The objective behind demonetisation is to force those who have hoards of black money to deposit it in banks. The objective is laudable because black money is used to fund terrorism of various forms to weaken economy – a bench of Chief Justice
Other critics argue that this policy reflects poor political and economic planning as the black market only consists of a small percentage of “cash” flow, as most illegal transactions take place through credit card and online fraud; a more informed decision to tackle the “cashless” black money market would have been truly effective instead of placing the livelihoods of thousands of farmers at detrimental risk.
The latest government update has revealed that when exchanging currency, people would be required to ink their right hind finger with indelible link to maximize the effectiveness of this security measure to shut down the black market economy.