There are times in the history of every nation where many decades and sometimes centuries later, citizens and countries around the world accredit a change with such big impact that is often called a game changer. Let’s be clear. These changes are not always positive or at least in the first instance perceived as such. Take for example the vote to Brexit in the UK on 23rd June 2016 and the election of Donald Trump as the president of the US and ‘the free world’ on 8th November 2016. Maybe by coincidence or perhaps a well planned and timed move by the India government, there was a ‘shock’ announcement that ₹500 and ₹1000 notes will be taken out of circulation with immediate effect. The intention was clear – in one foul swoop eradicate India of the use of the most common financial tender helping to fuel corruption through the use of black money as well as stop the funding of terrorism through counterfeit notes.
Narendra Modi, the charismatic premier of India, addressed the nation on the evening of 8th November to deliver the news that this change would be implemented as of midnight the same night and also gave his reasons for such a secretive execution of this ground breaking move, citing four main benefits:
- Creating opportunities for the poor, neo middle class, and middle class
- Bringing real estate prices, higher education costs, and healthcare within reach of the common citizens
- Stifling the funding to arms smugglers, espionage, and terrorists
- End the circulation of large volume of counterfeit currency
Of course, not everyone holding ₹500 and ₹1000 notes is corrupt and it was just as important to ensure these honest hard working folks are inconvenienced as little as possible. There is no denying there will be people who will be and have been massively inconvenienced, it is very important to see thoughtful measures put into place by the authorities to minimize such impact. For instance, for 72 hours government hospitals, railway, bus and airline ticket counters, as well as public sector petrol stations and crematoriums and burial grounds, were all allowed to continue to accept these notes as legal tender. This single article, released by the PM, summarises all of the above very well and also gives you the opportunity to see the speech for yourself. For those readers who prefer an English version of the speech; you will find it here.
It’s important to also discuss how the government will be handling mismatches in income versus deposits. Clearly, this is one of the main areas they are trying to eliminate and therefore a hard stance is very important. The fact that it has been made clear these scenarios of unexplained mismatches will be declared tax evasion and a hefty 200% fine will be applied on top of the tax liability, it’s clear the marker has been set. To further counter the situation, the government is also issuing new ₹500 and ₹2000 currency notes with the implementation of the two new notes explained well in this graphic.
Whilst watching news reports on television over the last few days, it was great to see how the youth of the nation has embraced the implementation of these anti-corruption measures. This can surely only bode well for a nation that boasts such a strong demographic dividend underpinned by an ever growing young working population. With the work being done by the government and the perceived acceptance to improve, India is certainly moving in the right direction in the corruption rankings. Clearly this is good progress but nowhere near good enough for the government who want to ensure the message within India and to the outside world – India does not want to and will not accept corruption as a way of life like it once did.
Let us for a moment ask ourselves what it will take in terms of physical money management to really make this work. Of course the government is on board and it seems the majority of the population is keen to make this work but what we haven’t asked ourselves is how they will make it work. For me the clear answer is technology. If more people in India decided to use digital wallets instead of maintain India’s status as a cash economy, perhaps, the move to a less corrupt nation may be an accelerated one. If you agree, you will be pleased to hear the immediate aftermath of Mr Modi’s announcement was a huge surge in traffic on two of India’s prominent mobile payment companies. Of course, one can put this down to a knee-jerk reaction but if over time this becomes more of a norm and adoption continues to be fast paced, perhaps Mr Modi’s initiatives such as ‘Digital India; and ‘Startup India’ will really have the impact with which he originally intended. Only Mr Modi and his closest confidants will know for sure but when launching these campaigns maybe he was concentrating on the bigger picture whilst others paid more attention to the detail. Let see who is ultimately laughing all the way to the bank. No prizes for guessing who my money would be on…
Author: Dishang Patel