The demonetization of 500 and 1000 Rupee notes took place on the 8th of November, 2016. What does this mean? In simpler words, the 500 and 1000 rupee notes ceased to be a legal tender in India.
Why was such a drastic and sudden step taken? Mr. Modi believes that this will stop the counterfeiting of notes and will crack down the black money in the country. Mr. Modi also declared the circulation of new 500 and 1000 rupee notes of the New Mahatma Gandhi Series.
Has this happened before? Of course! Immediately post-independence, 1000 and 10,000 rupee notes were withdrawn and new 1000, 5000 and 10,000 rupee notes were circulated. The same happened again in 1978.
What were the consequences of the 2016 demonetization?
We believe this was a very bold and historic step taken against corruption and black money. However, the middle class and lower-middle class suffered. Not because they had lakhs hidden under their beds but because most of the lower middle-class do not have a bank account and have saved their entire life’s savings at their homes. Also, the old notes could only be exchanged at banks. This became a complication for those without valid accounts.
Another unintended victim of this was Indian housewives. Most housewives saved tiny amounts from the sum they received to run the household. Stashed away in kitchen jars or in between saree-folds, their savings became worthless on the night of 8th November.
All this led to huge queues outside ATMs and banks. We noticed that these queues were not of worried, black-money holders but the hassled middle-class. Vegetable markets and grocers were shut which was another complication. This inconvenience continued for a few days.
However, if we look at the bigger picture and try to ignore the trouble we had to go through, this bold move could mean a lot for the betterment of India. The Indian markets dipped slightly but the price of gold soared. Most industrialists and economists have applauded Mr. Modi’s sudden step.
Now only time will tell whether this went as planned or it was a moot point.