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Out of the innumerable messages and jokes floating around demonetisation, this short one seems to address the inconvenience anxiety well: ‘A common man: I have no black money, why should I suffer in queue.

Out of the innumerable messages and jokes floating around demonetisation, this short one seems to address the inconvenience anxiety well: ‘A common man: I have no black money, why should I suffer in queue.

 

In one of the most audacious experiments in India’s modern history, Prime Minister Narendra Modi banned the two largest bills — of 500 rupees, or about $7.50, and 1,000 rupees — which account for about 86 percent of the currency in a country where 78 percent of financial transactions are done in cash.

 

Despite being one of the largest consumers of gold—next only to China—with an annual demand of close to 1,000 tonnes, India lacks an efficient gold ecosystem. 

 

Modi has walked the talk. He has taken the step, which honestly most of us felt was simply impossible in a country, in which the political process, real estate transactions, religious festivals and lavish weddings reek of black money or unaccounted wealth. With the de-monetisation of high denomination Rs 500 and Rs 1,000 notes, with effect from the midnight of 8 November, the Prime Minister has burnished his anti-black market credentials beyond any conceivable doubt.

 
A monetary tsunami struck India on the midnight of November 8 this year. A tidal wave that sucked out of circulation 86% of the nation’s currency at one stroke . As much as 16 billion notes in the denomination of 500 rupees and 6 billion in the denomination of 1000 rupees were rendered invalid legal tender by a government announcement that had been kept a closely guarded secret for a whopping six months.  
 
It was as far back as 1990 when I coined the phrase Bis-mil-muflis, or “I begin in the name of the poor” (with help from my good friend, Saeed Naqvi) to characterise the attitude of the government and Left intellectuals towards policy formation and execution (Bis-mil-muflis—And why anti-market policies hurt the poor, SUNDAY, 7-13 January, 1990).  
 
Yesterday, two colleagues in a multinational company were chatting about the recent move of the Narendra Modi government abolishing 500- and 1000-rupee notes. One of them said, “It really is a good move for curbing black money and ending circulation of fake money.” The other one responded saying, “I am already feeling at par with the rich. Our (salaried class) value proposition has increased now!”  
 
Demonetisation of Rs 500 and Rs 1,000 notes will expand the size of economy, increase revenue base and make the system cleaner while preserving its credibility, Finance Minister Arun Jaitley said today.  
 
At the same time, the department of industrial policy and promotion with the World Bank also put out a comparison of Indian states on how their EoDB has been performing. Thus, India has been lately focusing more on the aspect of ease of doing business.   
 
As India achieves a high rate of GDP growth, the highest in the world, will inequality of incomes be reduced? The Gini coefficient that measures inequality has risen from 45 per cent in1990 to 51.4 per cent in 2013 (coefficient of 100 signifies maximum inequality and 0 means perfect equality).   
 


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