Spike in notes forced the cull, says Adhia
CURB ON Says government intervenes only if circulation crosses acceptable threshold, as move involves both cost and inconvenience
the total currency flow in the economy,” Adhia said.
“We have got our systems in place, so people with legal sources of money should not be scared...We have several ways of tracking transactions to know which is black money.”
Though citizens will face some inconvenience for a few weeks, the government has ensured that enough currency notes of ₹100, ₹500 and ₹2,000 are infused in the banking system to allay fear of any possible liquidity crunch, Adhia added. “It will take some time, but by the first week of December, this will be normal.”
Adhia also allayed fears that the move will lead to increase in gold smuggling. “There is no correlation between gold smuggling and demonetisation of currency... The old high-value currency is illegal now so the seller will also not accept it and the buyer will not be able use it.”
“There is no limit on deposits, so people who have sizeable amounts of cash can deposit it without fear as long as the money is clean. Income tax laws are very clear. If you can explain the source of the money and show tax has been paid on it, there is no reason for you to worry.” This week will be remembered in history for two big events, that will have a lasting impact on the Indian and global economies. The first was India specific on demonetisation, while the second was the US election outcome which is expected to have a global impact.
Prime Minister Narendra Modi on Tuesday announced that in order to break the grip of corruption and black money, ₹500 and ₹1,000 banknotes will no longer be legal tender from midnight of November 8, 2016.
This is the third time that the government has announced such a measure. The first came in just before Independence. In 1946, banknotes worth ₹1,000 and ₹10,000 were demonetised, which were then reintroduced along with ₹5,000 denominated notes in 1954. Notably, these high-value currency notes were rarely held by the common public. All three denomination notes, then, were demonetised again in January 1978. However, these high-denomination currency notes accounted for less than 1% of total currency in circulation, and thus,