In an attempt to crackdown on tax evasion and illegal black market money, the Indian government decided to invalidate two of the most popular forms of currency. Although the 500 and 1,000 rupee notes accounted for about 80 percent of transactions in the Asian nation, they are now absolutely worthless.
This news sparked uproar and chaos in cities all across India. Thousands of people who depend on these cash notes had to rush to ATMs and banks to exchange these invalid bills for lower denomination notes.
The Indian government hopes that these measures will help to flush out bad cash in the economy and help India’s poor. Members of India’s Parliament also hope that billions of official notes will be able to recirculate and stimulate the Indian economy.
Economists are unsure if this currency move will really have a big impact in combatting the black money problems in India. One critic of this new measure, Cornell University’s Professor Basu, said that the “collateral damage” of this experiment could do more damage than good.
Professor Basu also said that people involved in the black money trade will most likely just accumulate new black money once the government releases its new currency. Although this measure will “flush” the system out temporarily, he feels the return of black money is unavoidable.
Not all economists, however, are so pessimistic. Some believe this measure could stamp out a good deal of corruption in the nation, as long as it’s closely monitored by authorities.
Many people in India are finding it extremely difficult to get by nowadays relying just on cash. Most vendors do not accept 500 or 1,000 rupee notes anymore, which makes it hard for people to buy basic necessities during this transition period.
India is currently the 7th largest economy in the world.