New Delhi, November 9: Prime Minister Narendra Modi sent a shockwave across the country with a single announcement yesterday. The Prime Minister declared that from today, the Rs 500 and the Rs 1000 bank notes would no longer be legal. Though the move was definitely thought out intensely and a proper mechanism has been laid indicating the further steps for citizens, there is a lot of uncertainty and panic swirling in the country. Those hoarding black money, panic for the right reasons while others seem to be hit by a sense of the unknown. in such circumstances, it is only right that we take a moment to analyse Narendra Modi’s shocking decisionAlso Read - Cyclone Jawad To Hit Odisha, Andhra Pradesh Tomorrow, NDRF Deploys 64 Teams in 3 States | Key Points

In a televised address to the nation, Narendra Modi announced that the Rs 500 and Rs. 1000 banknotes would be withdrawn starting from midnight tonight. The move is aimed at targeting the circulation of black money and counterfeit currency that is circulating in the country and often funds terrorist activities and arms deals. Also Read - Delhi-Dehradun Economic Corridor: You Will Soon Reach Delhi From Dehradun in Just 2.5 Hours | All You Need to Know

The declaration by the Prime Minister comes soon after the government’s scheme allowing for the voluntary declaration of black money came to a close recently. In the address to the nation, the Prime Minister said, “India has registered itself as a bright spot, and it’s not that this is a claim made by us, but by IMF and World Bank.  This Government is dedicated to the poor, and will continue to do so.” Also Read - BSF Celebrates 57th Raising Day, To Exchange Sweets With Pakistan On Attari-Wagah Border

As a prelude to the shocking announcement, Narendra Modi said, ‘There is a time when you realise that you have to bring some changes in society, and this is our time to feel the same. Corruption and black money is something we have fought for immediately after assuming office. The process of cash circulation is directly related to corruption in our country impacting the lower classes of our society.”

Modi also added that a significant amount of counterfeit money was being injected into the economy from across the border in Pakistan. This money has been used in the past to fund illicit fund activities such as arms deals, terrorist activities etc. It is because of this that the government has announced that from Midnight Nov 8, 2016, today, Rs500 and Rs1000 notes are no longer legal tenders.

What will happen next?

Addressing the issue of the immediate consequences of the ban on the two popularly used currency notes, Narendra Modi said, “You have 50 days (From 10 Nov to 30 Dec) to deposit notes of Rs 500 & Rs 1000 in any Bank or Post office.” However, Modi said that Respite for people for the initial 72 hours will be provided as  government hospitals will accept old Rs 500 and 1000 notes until 11 November midnight. As a result of the crackdown on these high-value currency notes, the Prime Minister has announced that the ATMs (Automated Teller Machines) will not work tomorrow and the banks will be closed. The ATMs may not work at some places on Thursday too, he said. Making the announcement on the delegitimisation of the Rs. 500 and Rs. 1000 notes,  Narendra Modi said, “Notes of Rs 2000 and Rs 500 will be circulated soon, RBI has decided to limit the notes with higher value.”

Further, as a result of the crackdown on these high-value currency notes, the Prime Minister has announced that the ATMs (Automated Teller Machines) will not work tomorrow and the banks will be closed. The ATMs may not work at some places on Thursday too, he said. Making the announcement on the delegitimisation of the Rs. 500 and Rs. 1000 notes,  Narendra Modi said, “Notes of Rs 2000 and Rs 500 will be circulated soon, RBI has decided to limit the notes with higher value.”

Citizens need not panic, however, as there will be no change in any other form of currency exchange be it cheque, DD, payment via credit or debit cards etc Further, Notes of Rs 2000 and Rs 500 will be circulated soon. It must be noted, though, that the RBI has decided to limit the notes with higher value.

Commenting on the drastic move by the government, the RBI governor Urjit Patel has said, ” The RBI has been concerned about growing menace of fake Indian currency notes which has been increasing in numbers. It’s a very good step to combat black money:SIT Chairman Justice (retd) M B Shah to ANI on the decision to scrap Rs 500 and Rs 1,000 notes. We have increased our production and trying to provide new currency notes as soon as possible.” However, despite all these assurances and assuming that citizens are willing to suffer for the greater good, the real question remains whether the ban will actually accomplish its mission.

Does demonetization actually help fight black money?

The first thing that must be noted is that though the announcement may seem simple to a layman, it comes with a huge cost to the RBI. The RBI will have to spend enormous amounts of money to print the new currency, especially the high-value Rs 2000 note. The pull-out will also have an impact on the stock market as at the end of the financial year 2014-15 the share of Rs1000 notes was an enormous 39%, with Rs.500 notes accounting for a further 45% of currency stock.

If one was to forego the cost the change was to produce, the next question that arises is its effectiveness. Higher denomination banknotes of Rs 1,000, Rs 5,000 and Rs 10,000 were reintroduced in 1954 and all of them were demonetized in January 1978. So this is not the first time that a government adopted this measure to fight the menace of black money.

Yet, even as one remembers the Diwali of money that happened in 1978 when workers were paid to light fire to massive godowns of money, one has to wonder why issue still persists. The answer to that is simple enough. The 1978 demonitization did not target the root of the problem. Unfortunately, we fear that hisory is about to be repeated.

There definitely ae some significant differences between the two scenarios. For one, the government is going to limit the production of the Rs 2000 note and those that will be produced, will have an inbuilt tracker laed by nanotechnology in them. this will ensure that the entire journey of the note is traced. The second major difference is that the economy of the country is much more digitised than what it was four decades ago. With cashless transactions and mobile payments, it becomes much more easier to trace the route of the money.

However, there are some glaring similarities between the two scenarios. It must be remebered that the vast chunk of black money is not stored in indian rupees. Infact, the first image that comes to mind when one talks of black money is enormous sums stored securely in Swiss bank vaults. This unfortunately will remain unchanged. Further, the Modi government’s decision doesn’t do much to target hawala transactions.

Despite these challenges, there is a certain optimism that is felt in the air. Whether or not the menace of Black money will be completely  cure is yet to be seen. For now, it seems that Narendra Modi’s surgical strike has ben successful in targeting those who needed to be targeted.