Hon’ble prime minister, Mr. Norendra Modi (NDA)  made sudden  official declaration  over the  cancellation of  500 and 1000 Indian  currencies ($7.50 and $15) to  prevent the backlash  of  corruption  and  black  marketing.  Demonetization  has been adopted by  Modi  to showcase  his  strength to fight with massive  black marketing, fraudulence, counterfoil and  scam.  On 8th Nov at midnight, it was decided to  ban Rs 500 and Rs. 1000 immediately.  However the  impact of withdrawing these two major Indian currencies  must be  long lasting  to bring  miseries to  wicked  businessmen, black-marketers  and    corrupted  employees  who have  a lot of illegal  money at home to evade  taxes.

Modi Appreciates People to Bear Turmoil – Currency Exchange Prevents Corruption

According to Modi, general people in India will have no bad effect but they need to swallow turmoil to some extend due  to the  problem of collecting or depositing fund.  They will get new 500, 1000 and 2000 notes with different pictures/sizes.  However, they need to exchange their old notes to have new ones.  This process is little bit complicated as there are certain obligations and  restrictions to exchange Indian currencies at banks.  All ATM machines in the country will be re-configured and made compatible with the newly printed currencies.  Foreigners  who visit India must have new notes to buy products at any local shop.  Similarly,  people living in remote places have to wait for collecting fund from local syndicate banks and insurance companies.  They must have documents to show when they are required at the time of changing bunches of Rs. 1000/Rs.500.

Impact of Currency Replacement –Good or Bad ?

People who invest black money on real estate or housing market will not be able to use their old notes randomly.  Few black marketers bought sumptuous jewelries,  gold coins, costly Rolex watches and furniture pieces to save their stored fund.  Jewelry shops have earned considerable profits within a week due to such panic in the market.  The declaration of withdrawal of Rs. 500 and Rs1000 notes  brought a jolt to smash dishonest traders and investors.  Corporate sectors which do tax evasion to have more profits must be trapped.    It is a crusade  against  high voltage corruption and Indians must be brave to assist Modi to fulfill the dream.  On the other  hand, leakage of  information over currency  cancellation,  few  privately owned  banking sectors  are found  playing  tricks by taking old currencies from  black marketers in exchange of 100 rupees (around $1.50). These banks have fake or dead accounts to help people to deposit old currencies and get back 100 rupees in bunches. However, in this case, private banks devalue the currency rate.    If any customer hands over $15 (1000 rupees) in cash, they will get somewhere around  $7.50 or less because of alternate transaction.  These currencies will be recycled to other accounts secretly. Around 60000 crore Indian rupees are circulated through  these private syndicate banks.  Modi warned that these banking sectors must  follow rules and stop illegal transactions.

Modi Gives Some Relief to Hospital, Medical Clinics and Railways

Modi has given some relaxation to hospitals and medical clinics as patients need to buy medications.  If they have old notes, they must be permitted to use their currencies in hospitals or to buy medications.  This relaxation is only restricted to healthcare sectors on emergency basis.   

GDP Will Be Affected by Demonetization

The abrupt crunch in Indian currency must double the negative effect  on Indian economy.  Experts think that due to this currency withdrawal, the GDP rate will be down in upcoming years.    The  possibility of deceleration of GDP  rate can’t be  removed as  many un-licensed traders,  and  unregistered  companies will  lose their clients after  the  economic crisis.    These traders have million dollars in bundles of 1000 INR or $15.  Stat reports have divulged new stories by confirming the recession in real estate, and building construction industry.  In addition, non-tax  business traders will be less powerful as their informal companies will have insufficient  money to continue trading smoothly.  Approximately 40 percent shares of informal trading agencies will be unavailable in the market.  FY18 GDP growth rate will be down to around 5 percent from approximate 7.3 percent.    However, mileage will be gained by strong and reliable players in the corporate sectors who have less resistance or obstruction from informal business rivals.  Same way, the unsecured business loan or easy financing industry will  not stand resilient due to the absence of old currencies.  The security for these traders will be considerably low after the demonetization.  Care Ratings’ findings estimate nosedive in GDP rate by 0.3-0.5 %.  Merrill  Lynch, economist and critic, has shared her views in a negative way.    Indian economy has ebb period right now.  GDP will fall by 50 basis points after terrific depreciation in the financial sectors.

Devaluation of Indian Currency Will Be Checked

If the percentage of fake currencies is higher, people will have to experience turmoil in  the long run.  For instance,    the increase in the circulation of fake currencies in the market,  the demand for  products will be unexpectedly  high. People will have to release excess amount to buy same products from vendors.  The value of the money will be low on account of availability of such unauthorized  fake notes. Therefore,  Modi  has tried to  stop  fake note  circulation by introducing new  currencies 500/2000 INR.  RBI approved new Rs.2000 or $30 to help local vendors and traders who have to deal with hard cash. In this case, ATM machines should be upgraded through configuration.

Currency Reshuffle – How Does It Affect American USD?

In reality,  currency appreciation and depreciation depends on demand as well as supply. If Indian currencies are available in sufficient volume, the interest rate will be low or vice versa.  There will be more Indian currencies in global market after the decrease in Indian currencies.  However, this fluctuation in denomination must be tracked meticulously.  In addition,    if the demand for Indian currencies increases the appreciation value of the rupee must soar up.  For example, in the event of huge demand to buy  Indian products, Americans need more Indian rupees to  pay their vendors.  So, value of Indian rupee must be appreciably  higher because of such overwhelming demand.  Indian rupees will be equal to American dollars from the perspective of public demand.  However,  in India, currencies are only replaced and the possibility of depreciation is comparatively low.    Therefore,  currency rates will not be different in comparison to USD.  India is a consumer country and it will have to import American products. So, ultimately this currency exchange rate will not be harmful to Indian traders to deal with American clients.

 Conclusion 

Narendra Modi has finalized his plans to restrict the flow of unaccounted currencies and fake notes to damage  the domestic market.  Corruption is slowly going  beyond control and people have to discard  fake currencies given by black marketers.    If businessmen  do tax-evasion by  hushing up the uncountable currencies boxed up inside their store-rooms, NDA government will be in severe danger. Growth oriented programs will be obstructed owing to the activities of criminals.  So, his bold steps to replace old notes must be an approach to wipe out black market to enhance the fairness in Indian national economy.  He has invited risks and danger to start his anti-corruption mission.  His vision to clean up the society of India is great.  He has set the record by minimizing the crime, corruption and fraudulence.