All fights against black money are raising a vague demand of withdrawing high denomination currency in form of Rs.500, Rs.1000. But unless we understand the crux behind this real demand, we will not be able to understand the importance of this operation. Why did Reserve bank of India injected these notes in our economy and how dangerous it could be for India to withdraw them without awareness. Let us try to understand things behind scene.
The fact which we all need to digest though hard is, at now ~8 Lakh Crores in form of notes are running in our economy. Out of which Rs.500, Rs.1000 notes share 76%. And if we include Rs.100 it is about 93%. In India around 70% of population do daily transactions in 60 to 100 rupees, then why these high denomination currency exist and for whom? This question do come in our mind and also why currency in form of Rs.50, 20, 10 is not easily available.
Inflation is causing a drop in value of rupee and against these situations printing lower denomination currency is a problem since 63 years. Inflation index is 9% to 10 % at now. Inflation raise money supply than products to satisfy demand because quality, cost of life and black wealth is too increasing. This means there remains no control on parallel economy in turn we are never able to control prices. On the other hand weak use of banking system keeps no way than to print high value currency. Only 40% of people in India are connected to banking network. Means 60% people believe that transactions are to be done in cash. If daily transactions are happening in cash then it is fine, but crores of rupees are being transacted in cash which also not getting accounted, give opportunity for black money to rise. Cash transaction does not generate any tax for Government and hence such transactions does not become a part of revenue source for Indian economy. This is the reason number of BIG shots are rising in India and on the other hand basic facilities needed for common man is not backed up by Government due to lack of white money.
| Country | Per CapitaIncome [A] | HighestDenomination [B] | A÷B |
| USA | $40,000 | $100 | 400 |
| UK | £ 20,000 | £ 50 | 400 |
| Japan | ¥ 40,00,000 | ¥10,000 | 400 |
| India | Rs.37,000 | Rs.1000 | 37 |
It has been globally accepted by all economists that if any country wants to progress, it has to raise the bank money supply. In USA 95% of transactions are done through banking network. To promote transparency and avoid corruption, developed countries are heading towards cashless economy. Great Britain is demanding itself to become cashless economy by 2014. If India needs to compete developed countries it has no choice than to move towards cashless economy. But if we still continue to print high denomination currency then not even 1% chance exist to minimize corruption, black money in politics, terrorism and many more.
We need to do lot of preparation to withdraw Rs.1000 and Rs.500 currency. This is hard but not impossible. Rather there is no other way around. In 60s USA has to withdraw currency more than 100$. Because of this they could manage corruption and group terrorism for a longer time. Now India has to take such step and for which Arthakranti Pratishthan has come up with a five point proposal (www.arthakranti.org) which we all need to think about. Swami Ramdeo baba is demanding 3rd Point of Arthakranti 5 point proposal. In this proposal we need to demolish all taxes except import/export duties. As a revenue source we need to establish a tax on all banking transactions as transaction tax (TT). We need to decide share out of this TT for Centre, State and Local corporation as well as the transacting bank. Limiting cash transactions means promoting bank money. All these aspects are being taken care by Arthakranti proposal. Withdrawal of high denomination currency is one of the five point proposal. Implementing only this 3rd point is impossible. But Swami Ramdeo baba unfortunately is demanding only 3rd Point. Patient is watching his death, operation is Must but if we are not prepared fully for operation then life of patient is at stake for sure !
This article has been published at Divyamarathi newspaper- 9th June-2011.
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Black Money and Terrorism
Your opinions are very vital and we have to force government to introduce such rules in the parliment and pass it on for the development and better future of our country. Our country is very rich in everything but the way we manage it creating more and more unstability day by day to our country. First of all we have to think to throw away our constitution and make one of it our own constitution for our country and her people. Country has to provide all the facilities, infrastructure, employment,etc... etc... but I suggest not to give any free services to the people by the government. We have to impose a civil code for the citizen without any favor to any religion,caste,creed, minority, etc... As you said if we drop out the big denominations such as 500 & 1000 will help to minimize terrorism and black marketing in our country. The criminals should be out of our parliment. There shouldn't be any exception for any body. We have enough good people in our country to lead and rule with proud and prestige in the world. Now our country is ruling by Dakus and thiefs and this fact is known by every citizen of our country and they are waiting for a leader to lead them to throw away from thier seats which they were holding for since our independance.
The citizen in our country is fed up with this people and waiting for a good leader to lead them to a right way. We will wait and work to fullfil our dream one day.