Large black money holders are saved
Most big players who have i)acquired assets with the black money, ii)converted into white, iii)acquired assets overseas, iv) Invested back in India as FDI in dollars through tax heavens like Mauritius v) Valuable metals like gold and silver will not be affected by this move. So Politicians and Business men have insulated themselves from this shock. They have converted their black money into dollars. Small proportion of their black money (might be less than 5 percent) which is in cash may be affected which is much less than the 45 percent tax they need to pay. It is blow to only those players who keep black money with them without investing anywhere.
It is a surgical strike on Hawala operators who generally transfer money from overseas and hold large big notes with them. Collapse of hawala transactions will be big boost to GDP of the nation and banking sector.
Government employees pay tax for the amount then earn legally. It is only those corrupt officers who have not invested their money are drowned.
Small and medium business units who runs economy of unaccounted transactions are the worst affected. These people avoid paying tax even though their incomes fall much in the tax net. Unorganized sector employees who are paid their salaries in cash will also face problems in exchanging the currency they had.
Non bank account holders will be affected for sure but their proportion is reduced with Jandhan. Especially in north eastern and hilly terrain areas where banking has not penetrated will be affected
As a whole this policy is a target on small and medium black money holders only. Even some of them also converted black money into assets to the possible extent.
Good future prospects
Most Black money is an outcome of corruption, this is a surgical strike against corrupt. Decrease in corruption levels will boost the nation in all terms.
The proportion of small and medium black money holders is very high in the nation. They are the future large black money holders. So curbing them is a wisest move as a large potential of future black money is stalled.
Net amount of black economy will be minimized and it will give government to implement its schemes and activities for the benefit of the people.
Encouragement of Virtual money(e- banking, credit and debit card) increases transparency in the nation.
As all the people will bring their money to banks, transactions of money increases and in turn raise GDP of nation.
Immediate state of economy
As the nation highly runs on unorganized sector the immediate condition of economy will be in a degrading. A parallel economy which is running on black money collapses to a major extent and leads to unemployment. Small and medium business units which sustains on tax evasion will crumble to large chain and multi-national companies. Small units do not have professional management and skill workers like MNCs and chain linked companies. This is a great chance for Ambanis, Adanis, Birlas, and other business man to expand their empire which may in turn result in collapse of small industry. Accountability of economy will surely increase but diversity in economy may vanish.India as a country should not become a puppet of a few businessmen rather it needs to give space for maximum businessmen for the future growth of the nation.
As banks will not be open for 2 days, the economy of nation will be crippled these two days. People face extreme situation these two days. Even after that people have to get ready for large queues which they use to buy first day movie tickets of star hero and much forgotten now with introduction of digital cinema. As Indian economy is cash run economy the 100 rupee notes which are in circulation will not be enough for transactions. If transactions decrease economy decreases. It takes atleast a week in urban and a month in rural areas to pump enough currency to rejuvenate the economy. The readiness of RBI with new notes is an important factor in determining the time by which enough currency is back with the people. Excess black money holders will soon start selling their notes for lesser value. A 500 rupee note may be sold for 400 now but its value falls to zero as the deadline of December 30 comes. Digital banking units like Paytm, freecharge, DBS, are the immediate beneficiaries in technology penetrated areas.
Welcome move
Any step which helps the growth of the nation is laudable and welcome. It will be a bigger achievement if government works faster to pump enough cash and bring back the economy in the quickest possible manner. The liberalization of Indian economy in 1991 has surely helped the nation, but in its immediate following many Indians lost their jobs and many local companies collapsed unable to bear the international competition. Now government must ensure that small entrepreneur do not lose out to big entrepreneurs like Adanis, Ambanis, Birlas,.
