Bye-bye 500 and 1000 rupee notes!
While the world is watching, the other clown becoming president of the United States, the Indian Prime Minister continues with his hobby of banning things. After banning beef meat almost everywhere, porn sites etc., he created the surprise yesterday... by banning 500 and 1000 rupee notes. With immediate effect (well the announcement took place around 8 p.m. and took effect at midnight), it was orchestrated masterfully. Basically, it means that now you can pay cash only with bills of 100 rupees (a little less than €1.5). Knowing that the India is a ‘cash economy’ (almost everything is done in cash) it’s going to be a little tough to adjust.
The intention is laudable though: putting an end to the ‘black economy’, fake currency and corruption. This plan has the merit of being ambitious! Apparently, it was the third (surprise) phase of Modi’s strategy, the first one being to encourage everyone to open a bank account (since August 2014, 254.5 million accounts have been opened, half of them in the rural sector*) and the second one to encourage all those who have black money to come clean**. (In fact the plan had in 8 steps*, I just simplified.)
In any case, this is going to bring up some change!
Here are the next steps summed-up:
And in more details (for instance what can tourists or people living abroad and holding cash can do): RBI_ Your questions answered by the RBI _ What to do with 500 and 1000 notes.pdf - source.
* Source: http://indiatoday.intoday.in/story/prime-minister-modi-surgical-strike-on-black-money-government-currency-revamp/1/805904.html
** The black money holders were given a chance from June to September to come clean and declare their assets – and pay taxes on it, with a penalty of 45%. But less than a tenth of the estimated amounts of black money (7 000 billion rupees (about 6% of GDP)) have been disclosed.