
India's demonetisation of Rs. 500 and Rs. 1000 notes - gshakir
http://newsite.thehindu.com/news/national/500-1000-rupee-notes-cease-to-be-legal-tender-from-midnight-tonight-PM/article16225089.ece
======
aub3bhat
This is the boldest and probably most brilliant move by any Indian politician
since liberalization of economy in 1990s.

Having said that, another way of understanding this is that as of today both
old 500 Rs and 1000 Rs notes have been "probabilistically devalued". For
anyone in middle class and below the value essentially remains the same (other
than a small devaluation due to effort required to get them exchanged),
however for anyone holding large number of notes, the value has been
significantly lowered by approximately ~10 to 20% consider when the money gets
deposited, there would be an income tax due on it.

Modi received a lot of flak not doing anything about black money and
corruption after getting elected in spite of promises before the election.
Bust as this move shows, he has taken the bold step, and can go for an
election in 2019 without worrying.

To make it even simpler:

Assume that people in USA used 100$ notes (hard to hoard 20$ notes) to skip
paying income tax (but mostly real estate transaction tax) and dealt in cash,
by declaring 100$ notes as illegal tender and forcing them to be exchanged for
new 50$ and 200$ notes. The government can ensure that this money is deposited
or converted in banks. Ensuring that all "fake" 100$ notes are caught / lose
value and people hoarding cash to skip paying income tax are forced to put the
money in circulation. Otherwise come December 31st the value of the notes is
same as piece of paper they are printed on.

~~~
Spivak
Isn't this a trick that will only work once? Wont the people who are taking
advantage of black money start using a different store of value that isn't
controlled by the Indian government like foreign currency or high value
commodities?

~~~
sfifs
A currency is useful only if you can buy products and services with it. In
India, you buy things in Rupees. Tou can't buy Rupees with dollars without an
ID at which point the government knows anyway it's probably just simpler to
pay your taxes

~~~
fgpwd
There is Bitcoin though

~~~
pritambaral
I remember reading about the Indian government passing regulations for the
tight control of Bitcoin<->₹ transactions in the country.

~~~
fgpwd
But there can still be Bitcoin <=> Bitcoin transactions as an alternative to
Paytm et al. It's very unlikely to pick up though I guess.

~~~
Kadin
Most people are only interested in Bitcoin insofar as it's convertible to a
local currency. So if it's difficult to do that, it's difficult to use Bitcoin
for most transactions.

------
h43k3r
For international readers: Rs 500 and Rs 1000 are the highest denominations
notes in India. Other available denominations are Rs 100, 50, 20, 10. This is
such a major move to curb black money in the history of Indian Politics and
Economy

~~~
uiri
1 USD is ~Rs 66. That is a staggering difference in purchasing power! I would
guess that the only note in the US with a similar reputation which is still
issued would be the $100. Notes larger than this ($500, $1000, $5000, and $10
000) have been discontinued since 1946 and actively destroyed by the Federal
Reserve since 1969.

Isn't there a concern that those who were using these high denomination notes
just switching to other currencies? Bhutan has a currency that is pegged 1:1
with the Indian Rupee and will (presumably) still issue Rs 500 and Rs 1000
notes. Sri Lanka is another possible candidate; and of course there are the
standard global reserve currencies - the US dollar and the Euro - whose notes
worth over Rs 1000 are relatively common place.

~~~
Scirra_Tom
> 1 USD is ~Rs 66. That is a staggering difference in purchasing power!

How on earth do you derive purchasing power from comparison of arbitrary
units? ~Rs 1 does not have the purchasing power of 1 USD,. 1 Zimbabwean dollar
does not have the purcahsing power of 1 GBP.

~~~
slg
The grandparent comment wasn't comparing arbitrary units, they were comparing
the units of each country's currency denominations. The largest active legal
tender in the US is worth $100 while the largest in India was worth $15 (now
will be $30). I think it is a fair assumption that those numbers aren't
arbitrary and that some thought went into choosing those denominations. That
gives you insight into the economies of each country.

~~~
Scirra_Tom
Largest banknote in UK is £50, largest in EU is €500. That does not imply a
staggering difference in purchasing power between £ and €.

~~~
1024core
I guess what the OP meant was that the _difference_ in what the highest note
can buy is staggering.

~~~
Scirra_Tom
Which is meaningless

~~~
1024core
It's just an observation that someone finds mildly interesting. Attaching
"meaning" to it, on the other hand, is meaningless.

------
leafee
(I'm watching the news live in New Delhi right now). The move is being pitched
as an attack against 'black money' and terrorist/criminal activities and
counterfeit .

The idea is if you have very large sums of money stashed away in cash, you're
now forced to deposit it into a bank and reveal it. If you're not comfortable
doing that, you're basically going to lose your money.

~~~
hash-set
There is always some rationale that involves bad actors. Then you peel back
the layers of the onion and find out the government just wants to screw
regular people out of whatever.

~~~
TallGuyShort
I don't disagree with your premise, but in this case, how can this screw
regular people? If someone has chosen to store a lot of their money as cash
instead of in a bank and doesn't know about this, I can see that. Am I missing
something else?

~~~
babyrainbow
I am not an expert. But may be, it is only the small time tax evaders that
store black money in local currency...So if someone has stashed away his lives
savings in a stack of 1000 Rupee notes, this move will force them to pay
taxes.

Nothing is still being done to deal with really big fishes. The ones who can
really make a difference.

So as usual, it is the middle class and lower that are being forced to pay,
while the upper and elite classes still given a pass and the government earns
good name in the process..

Rich and powerful still wins. It is business as usual..

~~~
manigandham
Being forced to pay taxes is not a bad thing. Middle class are not "losing"
anything.

------
billy8988
It is hardly going to fix the black money problem. Rich people have so many
employees to do the bank run for them. Within the next month, you will see a
huge spike in real estate market. People with black money will dump it in the
real estate market. (If you are not an Indian, this is how it works. You buy
an apartment/home/building for the amount X. But you declare it to the
government that you bought it for X/10\. The guy who sold it now has the black
money which he can reinvest or based on his income level, can deposit in the
bank. If he is a farmer, he can pretty much claim it as agricultural income
and pay no taxes). So, basically, black money will trickle down rapidly in the
next month or so.

~~~
drl42
The government has become pretty smart - their standard rates have increased
quite a bit (since they lose tax revenue) Secondly, I don't think people are
going to touch the old notes - just too much risk involved.

Infact, I would speculate that since a lot of black money is now worthless, we
might see rates go down, especially for new constructions

~~~
udkl
I second this comment. Real estate in tier-1 India cities is fueled by black
money. Now with people not having black money to invest in the market, I'm
expecting to see the trend go downwards.

------
nish1500
I grew up in a tier-2 city in India, and the amount of black money rich people
hoard around here is of ginormous proportions. Easily > 50% of the income for
most rich folks.

Can't wait to see how this unfolds.

~~~
umeshunni
How do they hoard this money? As cash?

~~~
shas3
Cash, money-laundering, sketchy real estate transactions (Benami- transactions
under fake names), informal banking (hawala), the same as in most places in
the world. Think early mafiosi in the US. The most significant legislative
actions for curbing these are: Benami and Hawala legislations, computerization
of land records in the late 90s and early 2000s, PAN numbers in the 90s and
Aadhar in the last few years (a bit like SSN in the US), and the OP.

------
rm2889
While this sounds great on face value, I doubt this'll solve the root of the
problem. Why did we have so much black money in India? Coz people didn't want
to pay taxes. Why didn't people want to pay taxes? Because they got nothing in
return. Governments (esp Indian) have been historically self serving and power
hungry. Tax money is usually either lost by PSUs loaning to the Mallyas of the
world or other corrupt bullshit (overpaying for public infra, raw materials -
contracts going to the highest briber etc.)

So unless that changes (more difficult than logistically declaring pieces of
paper illegal), maybe people will start hoarding other stores of value in the
future and figure out other ways to evade taxes. Am I being too cynical?

~~~
whack
> _Why did we have so much black money in India? Coz people didn 't want to
> pay taxes. Why didn't people want to pay taxes? Because they got nothing in
> return._

Sorry, I don't buy this argument. People in every country, regardless of how
good their government is, want to _personally_ pay as little taxes as
possible. If people in XYZ-Amazing-Country knew that they could reduce their
personal tax bill by 30% in a way that's guaranteed to be safe, a huge portion
of the population would take advantage of it too. It's a class Economics
tragedy-of-the-commons problem.

~~~
wav-part
So ? Are you saying we should pay taxes even if governement is wasting most of
it ?

You know what would motivate me to pay taxes ? Crystal clear development plans
with additional gurantees that It would not be used to support bloated
bureaucracy and subsidies.

Also who said governements are the only one who has to develop infrastructres
?

~~~
__Joker
No, you should pay taxes and make government accountable to it.

~~~
wav-part
Which can be classified under "fix your government" but had we done that, we
would not even be here.

Up until now governments have been in the background in exploiting its people.
But today this has changed. I hope/expect this would pave way for small-
limited-government movement in India.

This is the darkness before new morning.

------
manojlds
Some programmer humour -
[https://twitter.com/manojlds/status/796012773373161472](https://twitter.com/manojlds/status/796012773373161472)

~~~
ableal
I get the impression that naming things is also going well ;-)

------
abraham_s
500 and 1000 Ruppee note cease to be legal tender as of today midnight.
Everyone who has them can get it exchanged for 100 ruppee notes in banks,post
offices etc until Dec 31. You need to provide a valid id to do an exchange,
which means that the transaction will be traceable and Income Tax department
(Indian version of IRS) will be matching them to declared income. ATM and
banks are closed for the next couple of days.

Essentially people hoarding black money in 500 and 1000 ruppee denomination
will be stuck with this money as they can't exchange them. (money obtained via
undeclared/not-taxed transactions. One common method is show a lower amount in
the legal documents. For example show that land/house is being purchased for
100K$ on documents while paying say 300K $ thereby evading tax on 200K $, but
with the side effect making 200K$ black money). This is also slow down spread
of fake currency in the country. (Only temporarily until fake of the new notes
are created).

Having lived in India for most of my life makes me take a slightly pessimistic
view of this measure

\+ Small scale hoarders of black money will be affected by this move. \+ Once
you cross a certain wealth, hoarding cash is impractical, so you start
investing in land,gold etc. Those people will not be affected by this measure.

\+ Average citizen will be inconvenienced. I can see the long lines forming at
the banks for the new few days as people scramble to get the notes changed.
Not to mention people who are travelling etc, who might be having no money
except for the discontinued notes and no way to get more money for the next
two days.

\+ There will be attempts to circumvent this. I guess there will offers of
"exchange x amount and get y % of it" given to middle to low income people in
the coming days. But it is hard to scale this, so it wont affect the efficacy
of the measure. \+ I have a hard time believing that the people close to the
current Prime Minister / Government didn't know this was going to happen. (If
this measure wasn't carefully planned not to affect "friends" of the current
administration(look up Adani Group), I would be greatly surprised and will
change my opinion about the current Prime Minister)

edit: added one bullet point

~~~
twblalock
I would imagine that most of the wealthy Indian tax evaders have their money
in Swiss bank accounts rather than large stacks of rupee banknotes hidden in
their basement.

~~~
intended
Most wealthy tax evaders have long since brought their money back and
laundered it already.

Tax Windows have been open for a long while, people seem to forget that
there's been multiple amnesty Windows, the oldest being in the 90s iirc (could
be late 80s).

~~~
abraham_s
There was a amnesty window open a few months back. I recall seeing an ad for a
no questions asked amnesty with 50% and so tax rate.

------
ChuckMcM
I hope this move is successful, it is one of the few ways in which a
government can force cash out from under the mattress[1] and back into the
system. It is also why the US government gets really twitchy around systems of
currency that it can't easily monitor, whether it is bitcoin or detergent[2].

It is a temporary fix of course, the question of why the market forces allow
the black market trade to exist are the real questions that need to be
answered.

[1] "Under the mattress" being the euphemism for holding on to your cash
instead of putting it into a bank.

[2] [http://www.theatlantic.com/business/archive/2012/03/why-
are-...](http://www.theatlantic.com/business/archive/2012/03/why-are-
criminals-stealing-tide-detergent-and-using-it-for-money/254631/)

------
solutionyogi
I am originally from India, living in NYC for last 10 years.

Black money is a major problem in India, it's directly fueling This is an
ingenious way to handle the problem at its root. I don't know how Government
is going to handle this transition in a country as big and diverse as India.
Personally, I prefer the rip-off-the-band-aid approach. The only thing I
disagree with is the ATM daily/weekly withdrawal limit (10,000Rs/20,000Rs). I
think this withdrawal limit is too low and would inconvenience lot of folks. I
am not even sure what these low withdrawal limits are supposed to achieve.

~~~
mkagenius
> I think this withdrawal limit is too low and would inconvenience lot of
> folks

Yup. If someone needs to pay for medical emergencies, they will suddenly have
to ask for help from lot of people.

~~~
yummyfajitas
Or use a credit card. When I had my back surgery a few years back, I just
swiped for 1.2 lac. Of course, most people don't have a CC with that high a
limit...

~~~
mkagenius
> Of course, most people don't have a CC with that high a limit

In India, no body has a CC, even debit card is only 22%

~~~
KumarAseem
In India, it is mostly the poor who don't have CC. Every upper class person
has multiple CCs and most of the middle class, specially those in the age of
20-40 have atleast one CC. People may keep just one debit card but they do
keep multiple CCs. And now even the poor have bank accounts and many have
debit cards.

------
ramshanker
Tonight, Americans counting Votes. Indian counting Notes.

------
jpatokal
Burma (Myanmar) has done this several times for the same declared reason, but
with a batshit insane dictator with a predilection for numerology, so their
demonetisations went like this:

1985: 50 and 100 kyat notes demonetized, replaced by 15, 35 and 75 kyat notes.

1987: 25, 35 and 75 kyat noted demonetized, replaced by 45 and 90 kyat notes.

[https://en.wikipedia.org/wiki/Burmese_kyat#1972-1988](https://en.wikipedia.org/wiki/Burmese_kyat#1972-1988)

------
hyperion2010
Strange part about this is that they are going to issue new 500 and 2000 notes
as per > 8:32 pm: A new series of Rs. 500 currency notes and Rs. 2000 currency
notes will be brought into circulation.

Pulling current notes I can understand, but the problem is that the
denomination allows people to move lots of money in a minimal amount of space,
so replacing them isn't really solving the problem.

~~~
blevinstein
500 rupees = $7.52, 1000 rupees = $15.05

These are not large denomination bills.

~~~
nish1500
28 of the latter make up an average Indian's monthly income. It's more
significant than $100 is for Americans.

~~~
vmarsy
Meanwhile you only need _three_ 500€ bills to make up for the average European
income. (And 500€ is 36651 rupees.) Those 500 and 1000 rupees are the largest
denomination bills in India, but you need almost 10 times more of them to make
up for the respective average income.

~~~
bonzini
In fact, the same is said in Europe about the absolute uselessness of 200 and
500 euro bills. I have only held a 200 euro bill once, and never a 500, but
also thanks to the Schengen area it is trivial to (illegally) being insane
amounts of money to Switzerland. This is why the EU was pressuring Switzerland
to abolish bank secrecy.

~~~
ryanlol
> about the absolute uselessness

Yeah, no. Even a relatively small amount like 30k is a _major_ pain in the ass
to carry around in 100 euro notes.

30k is what one might pay for a car, for example.

~~~
lmm
If you're spending 30k, paying an extra 20 for a banker's draft is
insignificant. And it's not like you buy a car every week. (I also can't
imagine feeling safe carrying anything like that much cash around. What if you
lost it?)

~~~
ryanlol
Banker's drafts can be an even bigger pain in the ass in the EU, with some
banks charging _percentages_ for them... And losing one of those tends to be a
Bad Thing too.

Anyway, my point was that despite being rare the 200 and 500 euro notes are
far from "absolutely useless".

~~~
lmm
I really struggle to see how it's useful to an ordinary person. You maybe save
a little money, sure, but for a non-1%er the risk just seems completely
disproportionate. I mean any dealer/business would accept a bank transfer,
right? So it only makes sense in the first place for buying a car person-to-
person (and for friends/family a bank transfer would work too). Carrying 30k
to meet a more-or-less stranger who knows you're going to be carrying 30k?
Sheesh.

------
sn41
This is quite big. An expert says that 87 percent of all of India's cash
reserve is in 500 and 1000 Rupee notes. It might reduce black money. In any
case, the next few weeks are going to be interesting. Almost an emergency
atmosphere right now in front of ATMs at 11 pm in the night.

~~~
siddg
source?

~~~
sn41
[https://twitter.com/sgurumurthy/status/796011217709998080](https://twitter.com/sgurumurthy/status/796011217709998080)

------
titomc
All the black money is in gold, dollars & euro ! or at the swiss banks. This
is not going to smoke out the big players in this game.

~~~
calvinbhai
you are thoroughly underestimating how many notes are stashed in homes, under
the beds, in the walls, in the water tanks and attics.

~~~
alimbada
Your comment reminds me of this:
[https://media.giphy.com/media/3o7ZeC2C6WBLzdwAQE/giphy.gif](https://media.giphy.com/media/3o7ZeC2C6WBLzdwAQE/giphy.gif)

------
captn3m0
To throw the startup scene into the mix: FinTech companies are celebrating
this right now:

>Keep the money digital. Superb step by our dear PM @narendramodi From a bit
inconvenience to incredible bold step ! #win # - Vijay Shekhar, founder paytm.

Being seen as a strong move towards cashless India.

------
owaislone
Master stroke by the government by introducing 2000 Rupee note without even
talking about the inflation and an economy that is in ruins. Good one time
move against a subset of corruption and counterfeiting while getting away with
not having to answer any questions about bad economic conditions.

I for one hope this leads more people paying taxes even if in the short term
so the Government can consider lowering taxes for the middle class.

------
neximo64
What about people not in India with a few 1000 rupee notes lying around, those
are valueless for good? I have 2 notes.

Wont the funds be effectively destroyed and removed from circulation, for
those who don't put their cash in the bank by the end of next month. Wont this
have deflationary consequences?

~~~
CydeWeys
2,000 rupees is 30 USD at today's exchange rate.

I don't see why you wouldn't be able to exchange them at a money changer
wherever you happen to be now, but for that amount it may well not be worth
it.

~~~
sjf
The rupee is a closed currency, the OP was never permitted to take the notes
of the country in the first place, so there is no way to change them.

~~~
callmeal
You are allowed to carry up to Rs 25000[1] out of India.

[1] [http://www.livemint.com/Money/xlZJZ0JJQ1xcx7792Vrt2O/DYK-
You...](http://www.livemint.com/Money/xlZJZ0JJQ1xcx7792Vrt2O/DYK-You-can-
carry-up-to-25000-abroad.html)

~~~
sjf
Only for Indians.

------
Nanigirl
This has nothing to do with paying taxes. I paid all my taxes and I bought
Indian Rupee to take a trip to India and now my trip is a waste. I cannot go
because my Rupee is no good and I cannot exchange it at Chase Bank where I
bought the currency.

------
callahad
Doh! I was in India earlier this year and forgot to change currencies on the
way out. Any ideas for a US national holding 9 of the Rs500 notes?

~~~
th0br0
No can do. You're officially not allowed to remove rupees from India as far as
I know: [http://timesofindia.indiatimes.com/business/india-
business/N...](http://timesofindia.indiatimes.com/business/india-
business/NRIs-foreigners-cant-leave-with-rupee/articleshow/22679752.cms)

~~~
callmeal
That article is from 2013. They changed the law in 2014 - you're allowed to
carry up to Rs 25000 out of the country.

------
prabhuabi
500 and 1000 rupees case is very welcome and in this most of them will get
caught particularly 1)corruption 2)cricket players & bookies 3)celebrities &
politicians 4)Black money & Fake moneys & 7) jewelry shop Not only this in
every government office they should stick the phone number of vigilance ,if
any one is asks for the bribe immediate action should be taken. Only then in
next couple of years we can proudly say that India is a developed country.
Finally I appreciate that Prime Minister of India Narendra Modi for the great
job and brilliant move.(Jai Hind)

------
jaggudada
I feel this just taxes the common man, who maybe through a sale of land or
house does hold some money that hasn't been taxed. The Ambanis and Birlas and
Adanis have front companies that definitely will be used to launder money. And
they hold shares as well, which aids to money launder using their foreign
companies...anyways..the Govt didn't bring a Paisa back from the big fish
holding lacs of crores in Swiss accounts..now this!!! Property prices and all
asset values will now how down like crazy!!!

------
pksadiq
What a nice trick! This news shall get dominated at several countries over the
US election news.

------
asenna
I'm not sure why people are not focusing as much on the other major issue this
step was taken for - Terrorism funding and economic destabilization attempts
from across the border.

It is known that massive amounts of fake currency is circulating in the
economy that have been brought in from Pakistan (kind of like a silent proxy
war). Even though the current currency had measures to be distinguished from
the fake ones, it was difficult to do so by the common person on the street.
The RBI chief has mentioned that the new notes would make it much more
difficult to replicate and should be easier to distinguish by a layman.

The above, along with the other massive benefits of addressing the black money
issue, this move is definitely a winner. The introduction of UPI (Unified
Payments Interface) [1] earlier this year and the heavier black money scrutiny
will definitely help India move to a relatively more cashless economy.

[1] [https://www.quora.com/How-will-the-UPI-interface-of-NPCI-
cha...](https://www.quora.com/How-will-the-UPI-interface-of-NPCI-change-the-
payments-landscape-in-India)

------
soniagupta
I am not sure if it takes care of corruption completely to be true. Most of
ministers and big business people, they have Swiss bank accounts. Though with
UP elections coming, it may affect the heat. But again, the ministers are most
corrupt and not sure how things will play there. At common man level, I am
wondering how much will it help with inflation. Already in last year, the
taxes are raised to such a high level that the investments there are already
looking waste. With this move, when property prices will be high on paper, but
lower in actual, it will also effect the property prices that were paid in
full and I am including most of properties purchased by service class people
or NRIs, with no black money. Not sure, but just going with words I am trying
to draw a full picture here. My investments in India were devalued in last
year because of taxes, properties prices are also highly affected. At least as
one of one year, this will affect the property prices further. Will it even
help common people to a large extent or is it uprooting old Indians while
making foundation for lower classes.

------
supersan
This is a great move. Though I only hope that depositing whatever money you
have is easy because all I can imagine now is kilometer long lines at every
bank

------
sidcool
India has faced menace of fake money and black money hoarders. Good move. I
will bear the inconvenience for better governance.

------
ijafri
Strange, in Pakistan it's the opposite Govt issued Rs. 5000 note which is
equal to INR 3171 because otherwise people were using USD 100 bills .... and
only making USD stronger locally.. I still don't get how they are going to
keep big guys from keeping USD $100 ... I would keep an eye on USD vs INR in
coming weeks

~~~
dingo_bat
In India USD is worthless. I don't know why people would use other country's
money unless their own economy is under heavy stress like Zimbabwe or
Colombia.

~~~
yummyfajitas
This isn't true at all. You can't buy an auto ride, but USD and Euro are used
as reserve currencies. If nothing else, inflation is significantly lower than
for rs.

A surprising number of people have asked me if they could change their black
money with me for dollars at favorable rates.

~~~
dingo_bat
Can you use USD as currency in India? I haven't seen a single place that would
accept that.

~~~
yummyfajitas
You can't buy regular items (e.g. a dosa) with USD except maybe at the
airport. From what I'm told, USD is sometimes on the table as currency in
black money transactions. I don't know the specific mechanics of it - I'm a
firang with no black money.

~~~
0xmohit
Yes, they do accept USD at the airports. I've even seen a restaurant at a
local airport where they refused to accept INR.

------
anupshinde
Black money and such a large parallel economy had become a big problem. And
like it or not, we were being forced to stay a part of it while trying to get
out of it.

This sudden demonetisation has not curbed the problem, but it has hit a RESET
switch on the parallel economy (black money). That is great news. First,
people will not want to lose their money and this will result in huge tax-
inflows. Second, some people will get prosecuted for tax evasion - sending a
strong signal. High tax rates will still drive a small percentage of people to
evade taxes. But upgraded technology will delay recurrence of large scale
black money problem, probably for decades to come.

Long queues at ATMs and petrol(gas)-stations. I thought it could turn into an
anarchy kind of situation. But most people feel happy about this inconvenient
but necessary decision.

------
elango
Though it sounds like a bold move, it will not be a Richs to Rags story, most
of undeclared wealth is already invested in Gold and Property (in proxy
names).

A lot of people having undeclared wealth are going to lose 1% to 5% their
wealth (which had held as cash for liquidity), no big deal.

------
NikhilVerma
I am personally not sure about the impact of this. I am hoping it will bring
some positive change, Indians do have a habit of hoarding huge amounts of
cash. It's not something specific to "black money hoarders".

Anyway I pity the bank employees for the coming few weeks!

~~~
guruparan18
Interesting no mention about gold, land or other valuables. This hits hard on
the middle class who were holding money. Then there are ultra rich, for whom
may be they are holding anywhere between 0%~30% of their black money in cash,
others in other investments. For them, this is not a big issue.

------
pattisapu
Some American economists have proposed doing something similar for large
dollar bills:

[http://www.wsj.com/articles/the-sinister-side-of-
cash-147213...](http://www.wsj.com/articles/the-sinister-side-of-
cash-1472137692)

------
sudhirj
As luck would have it, I've recently started work on
[https://tillbill.in](https://tillbill.in) \- kept thinking it would be great
to have an easy way for individuals and small businesses to run the work
cashless.

------
an0nym0us2256
I think Znews misunderstood the GPS thing.

I think the notes have some sort of unique digital ID.unique ID's are not
new(we had serial numbers before),but they were difficult to keep track
of(bankers can't keep noting serial number of every big note they take or
give).but the bank counting machines can now track these numbers in real
time,and catch if they find a unique ID is not unique anymore(duplicate). This
will mainly help with the counterfeit notes problem.

The black money problem will be helped because they will have to declare or
lose their black money during the exchange.

2 birds with 1 stone.. well played modi

------
prabhuabi
500 and 1000 rupees case is very welcome and in this most of them will get
caught particularly 1)corruption 2)cricket players & bookies 3)celebrities &
politicians 4)Black money & Fake moneys not only this in every office they
should stick the phone number of vigilance if any one is asks for the bribe
immediate action should be taken only then in next couple of years we can
proudly say that India is a developed country. Finally I appreciate that Prime
Minister of India Narendra Modi for a great job.

------
known
80% India's economy is running on black money; Without black money people will
kill each other; Futile attempt;
[http://www.dailymail.co.uk/indiahome/indianews/article-39179...](http://www.dailymail.co.uk/indiahome/indianews/article-3917994/Modi-
drop-bomb-BLACK-MONEY-Billions-illicit-cash-fake-currency-turn-trash-Centre-
abolishes-Rs-500-Rs-1000-notes.html)

------
gshakir
This is interesting that is coming off following a tax evasion amnesty.

------
sandeshd
I never thought any politician can make such decision. Modi just made
something really big announcement for making India much better than we guys
can imagine. I love this move.

------
sfifs
The timing is also appears to be aimed at significantly reducing cash
availability for elections in the big states of Uttar Pradesh and Punjab which
should come in Jan-Feb.

During elections, there is massive voter etc bribery with currency that tends
to happen and political party workers tend to intimidate merchants into
funding them. Undoubtedly the key political parties have already stashed cash
for the elections and all of a sudden, the cash is useless.

------
ambalal
Can somebody help me here? I am outside India with some cash in 500 and 1000
notes which I keep for immediate use when I arrive in India. What should I do
in this case?

~~~
shashi20008
Unless you can reach a bank, or postoffice in India, it would be difficult to
exchange your cash at full value. If you have a debit card with you, you can
simply withdraw from ATM upon your arrival in India. In this case you can
forget your cash for now, you can exchange it once you are in India. You can
do so after Dec 31st too. If you do not have a debit card with you, I guess
you could call a friend to pick you up at Airport. You could also try your
luck with a local Currency Exchanger where ever you are, and ask for a change
into 100 rupee notes. It will be costly, but it might work.

------
ramshanker
I just love Modi Ji's deadlines. Always do it NOW mode. :)

------
known
Why not just adopt US dollar?

America will promote FDI for you;

America will print currency for you;

America will prevent hawala for you;

America will fight terrorism for you;

America will prevent inflation for you;

America will prevent black money for you;

America will prevent fake currency for you;

[http://qz.com/260980/meet-the-countries-that-dont-use-
their-...](http://qz.com/260980/meet-the-countries-that-dont-use-their-own-
currency/)

------
Nano2rad
Fighting illegal black economy is fine, but withdrawal of notes is not for
that. There are other hidden agenda to this. RBI cannot go back from its
promise of providing the value of the currency. This is psychological
experimentation. Today Rs. 500 is withdrawn, tomorrow all currency could be
withdrawn. This trying to deploy state power but without bearing any fair cost

------
ronzensci
There are 16.5 billion notes of Rs. 500 denomination & 6.7 billion notes of
Rs. 1000. This is going to be a humongous recall exercise.

------
ramshanker
The fun has began. Suddenly there are more vehicles roaming around late night
than usual. Big Bazars are open even past 11:00 PM which used to close at 9:00
PM daily. Tried withdrawing Rs 100 Notes from all the ATMs in the neighborhood
but other people got there first. Now ATMs are left with only Rs 500 and Rs
1000 denominations. :D

------
MallikharjunP
How many days other countries given their people for exchanging currency??

------
trhway
reminded about demonetization in 1991 of the 2 top bank notes of USSR - 50 and
100 rubles notes. Similar purpose - supposedly only dishonest corrupted
officials, thieves and black market people had significant amount of money
stored using those notes. Also USSR government claimed that a lot of those
banknotes were brought into the country from outside(!) - supposedly as
economic operation against USSR (sounded back then like propaganda crap, so i
never even tried to research into it). USSR was already on its way out and
that shock (in particular causing significant ruble inflation acceleration) to
the already dying economy, was basically the last - half year later USSR de-
facto disappeared :) (hi! to everybody who remembers those "exchange money"
guys hanging near subway stations back then)

------
WTW
Maybe not the right forum to ask, but given the expertise on India here it's
worth a shot. I exchanged euro to INR (cash to cash) about 50K INR. I did not
keep the receipt. What would be the easiest way to get the money exchanged or
transferred to my (Irish) bank account?

------
lazyant
[http://www.nytimes.com/2016/05/05/business/international/ecb...](http://www.nytimes.com/2016/05/05/business/international/ecb-
to-remove-500-bill-the-bin-laden-bank-note-criminals.html)

------
blackoil
You have to deposit all these notes in your bank account, from which you can
get new notes. Anyone hoarding huge amount of black money in cash can't go to
bank with it, and his money will turn worthless. Diluting such money will
easily erode 20-40% value. So definitely a bold move.

~~~
dx034
They'll probably buy houses above market value. The seller can declare the
money and pay taxes on it. The houses can be sold again one by one over the
next years and the money legalized. Basically an easy way of laundering it.
Still good for the state as the money is taxed.

------
WTW
I presume this will not be the right forum to ask. But I'm a foreigner and I
exchanged euros to INR for about 50K INR (cash to cash). I didn't keep the
receipt for this. How could I get my money exchanged or transferred back to my
(Irish) bank account.

------
aanchal_
No, to whoever thinks that one will be able to buy gold or property with their
black money because the seller will have declare where the money came from
even if he pays taxes and will lead to the guy with the stash who won't be
able to explain it.

------
wyager
Regardless of how this might help with "black money" (which seems to be a bit
of an overhyped political bogeyman), any attempt to decrease the value or
purview of cash is bad news for human rights. When all legal money is in
government-controlled banks, you open up the door to all sorts of nastiness
including political account freezes, government theft of funds, forced
negative interest rates, etc. I personally have had my account frozen and had
money taken by lien due to a paperwork mistake at the state comptroller's
office. It took a few days for them to fix, and Wells Fargo charged me "legal
fees" I never got back, so I have a dim view of any government action that
makes the use of cash less convenient, less liquid, or less legal. In light of
this news, I imagine many Indians will stop trusting Rupees as much and might
just start preferring to transact in USD or something.

~~~
witty_username
> Regardless of how this might help with "black money" (which seems to be a
> bit of an overhyped political bogeyman)

Why is it a bogeyman? Have you researched the situation in India? It's very
different from the U.S.

> I have a dim view of any government action that makes the use of cash less
> convenient, less liquid, or less legal.

The government will introduce new 500 and 2000 Rs notes.

> forced negative interest rates

How is it forced? You can still keep cash under your matress.

> In light of this news, I imagine many Indians will stop trusting Rupees as
> much and might just start preferring to transact in USD or something.

What? This is way too far fetched.

~~~
wyager
Yes, I've done some (admittedly shallow) research on the prevalence and effect
of black money, and the impression I got was that it's like "money laundering"
in America; actually not that significant or deleterious, but a convenient
political talking point.

> The government will introduce new 500 and 2000 Rs notes.

Arbitrarily downgrading existing notes makes the currency both less convenient
and less liquid (and, I forgot, less fungible).

> How is it forced? You can still keep cash under your matress.

For now, yes. I was referring to the war on cash in general.

> What? This is way too far fetched.

We now have reason to believe they might pull this trick again in the future
with the new notes. A rational person would therefore assign a lower value to
the new notes than their nominal "face value" before the government devalued
the old notes.

~~~
bharath28
>actually not that significant or deleterious, but a convenient political
talking point.

This is not true. This is a problem that significantly impacts the economy and
visibly changes the equation for the middle class. Real estate, cars, and
other things you'd consider somewhat essential to an average household are
artificially priced because of the purchasing power of people with "Black
money". It is more than a political talking point.

~~~
wyager
Do you have a scientific study backing this up? You just restated the claim
that it is a problem.

~~~
bharath28
> a scientific study backing this up?

As opposed to the "impression" you got that this was a convenient political
talking point?

I've bought real estate in India and visibly saw the effects in the last
decade - inflation without commensurate change in infrastructure.

As to your question of studies, here are some starting points (some dating as
far back as 1995). The problem is serious enough for the government to have
set up 10+ independent commissions to investigate the issue (which are cited
in the paper by the Ministry of Finance) - the net cost of the black economy
is estimated to be ~12-20% of the GDP, which in my books counts as a serious
issue

[http://finmin.nic.in/reports/WhitePaper_BackMoney2012.pdf](http://finmin.nic.in/reports/WhitePaper_BackMoney2012.pdf)

[https://rbidocs.rbi.org.in/rdocs/publications/pdfs/73533.pdf](https://rbidocs.rbi.org.in/rdocs/publications/pdfs/73533.pdf)

[https://rbidocs.rbi.org.in/rdocs/publications/pdfs/73533.pdf](https://rbidocs.rbi.org.in/rdocs/publications/pdfs/73533.pdf)

[http://www.idosi.org/mejsr/mejsr23(3)15/17.pdf](http://www.idosi.org/mejsr/mejsr23\(3\)15/17.pdf)

[http://www.jnu.ac.in/SIS/CITD/DiscussionPapers/Financial_Rep...](http://www.jnu.ac.in/SIS/CITD/DiscussionPapers/Financial_Repression.pdf)

[http://www.nipfp.org.in/media/medialibrary/2014/10/BLACK_MON...](http://www.nipfp.org.in/media/medialibrary/2014/10/BLACK_MONEY__IN_THE_REAL_ESTATE_SECTOR_A_STUDY.pdf)

[Edit: Typo]

~~~
wyager
> inflation without commensurate change in infrastructure.

Inflation isn't tied to infrastructure growth, so not sure why you would
expect this In fact, if the government pulls this kind of stuff, one should
expect to see inflation without any benefit attached. As I said, messing with
money's fungibility makes it less valuable.

> The problem is serious enough for the government

Yes, for the government; it hurts their tax revenue. That doesn't mean it's
bad for the economy. I'll read those links when I get home.

>the net cost of the black economy is estimated to be ~12-20% of the GDP,

Black markets almost always increase production. People use them because
they're more efficient than government-controlled markets. When they say
"costs" they probably mean "the government loses access to".

------
naveen99
cash has always been a hot potato, particularly in india, due to high
inflation.

the elephant in the room remains real property registration / valuation / tax
reform.

only a matter of time. This is one of the silver lining's of the modern
surveillance state.

~~~
Ar-Curunir
Eh? What does this have to do with surveillance?

~~~
codeisawesome
Seriously? Tracking every transaction gives a complete illumination of every
individual's life to any government.

~~~
Ar-Curunir
This is not tracking any transactions, though? What the cash does once it's
out in the wild is not known to the govt.

~~~
naveen99
Yes, but now government is calling back all the cash in the wild. I think they
are planning to write down who has how much when they bring it in, I believe
in a ledger called a bank account.

------
unethical_ban
What if people just keep accepting it, just not through formal banks? Paper
money is worth what people think it's worth. If some money/object moves
outside the banks anyway, perhaps it won't be completely worthless.

~~~
jogjayr
That's a reasonable question. It's possible the 500 and 1000 notes will be
relegated to large, all-cash transactions where the goal is to avoid taxes.
But I imagine that some amount of osmosis will _have_ to take place. You can't
buy food or pay for gas with a 500 note after all; probably any businesses
found accepting them would face charges.

And if you can't use them for anything except real-estate purchases and the
like then their value is going to decrease over time. The number of 500/1000
notes will asymptotically approach zero over time as they get converted
through official or unofficial channels.

------
aanchal_
Ummm, no, you can't buy gold or property either with the money now because
even if the seller pays taxes he had to declare where the money came from and
how would that get explained

------
0xmohit
India is a country where property transactions are rare without a significant
portion in hard cash.

If this move has to be any good as advertised, then property prices should
take a hard hit.

------
pksadiq
Note for every Indian: never accept Rs 500/1000 even from known people anymore
(there will be too much fake notes circulating these days).

------
dragonsh
This is a strategy copied from China. They did same in 1970-80's. Funny part
is this is trying to get money from within Indian economy and wasting on govt
and pet projects. The promise to re-patriate black money stashed outside India
nowhere in sight. China bring in fugitives and money back even from official
who took US citizenship. Modi can just dream of it and take money from
hardworking Indians living in India.

Populist measure to increase vote bank and divert attention from original
promise to bring back black money from abroad to India.

~~~
leafee
> This is a strategy copied from China. They did same in 1970-80's.

Citation needed.

~~~
atxcrab
India did this once already . 1978 - all denominations gt than 100 INR were
demonetised

~~~
atxcrab
[https://indiankanoon.org/doc/1547/](https://indiankanoon.org/doc/1547/)

------
xcoding
Has somebody better idea than this to curb black money and counterfeit? If
not, shut up and watch next.

------
Nanigirl
India gave no warning on Rs. 500 and Rs. 1000 notes. How are we suppose to
cash in the ones we have?

~~~
known
Go to a nearby bank with your ID

------
lprasath007
I guess Indian Economy is going to grow and will be controlled well...

------
ak39
Good. Now get rid of the crore and lakh "decimal" craziness.

------
gshakir
This has downstream implications on:

1) Voting and democracy. No one can easily buy off votes for Rs.500 or
Rs.1000. 2) Real estate transactions. 3) Gold transactions. Now I bet you
cannot sell off gold that easily as you would not be given cash in return.

------
kevindong
For reference (assuming 1 US Dollar = 66.205 Indian Rupee):

Rs. 1000 = $15.10

Rs. 500 = $7.55

------
anuraj
One of the most idiotic decisions ever - just wait and watch the anger on the
streets in the coming days. India is not ready to be a cashless economy - it
is eons away with its illiterate masses.

~~~
dvndvn
Who said India will become cashless? Illiterate and poor masses don't have to
worry about how to transact in electronic money. They can happily have cash,
whatever little amount they have and enjoy just like they are doing today. Its
just the elite goons that will have trouble.

~~~
anuraj
You clearly don't understand the implication - wait and watch

------
sidcool
All black money and hoarders will cry to sleep today.

~~~
dx034
Or quickly buy real estate/gold/farm land above market value. The seller
declares the money and pays the tax, the buyer successfully legalized it.

~~~
Scirra_Tom
A lot of that will probably be subject to corporation tax. Government still
gets a nice boost.

~~~
dx034
Definitely! I don't doubt that and like the move. But I don't think anyone
will be charged with corruption or tax evasion because of it.

But I'm not from India, so pure speculation.

------
lprasath007
Indian Economy is going to be Increased well

------
puva
I don't think There will be any positive change but the businessmen will
suffer as think how will they run thier shop as some shops are costly ones

------
overcast
Aww man, I just lost $15 USD worth!

------
rm2889
All those trees. Sniff.

------
joosters
Could someone fix the title, please? The notes aren't being made illegal, they
are just ceasing to be legal tender. There's a big difference! Right now, the
title is clickbait.

~~~
dingo_bat
But they _are_ illegal to use for any monetary transaction. I read it like
that.

~~~
pritambaral
No.

Using an arbitrary piece of paper for a transaction isn't illegal, is it? If
two individuals in India agree to an exchange of goods, but with USD instead
of INR, that isn't illegal, is it? It's just that whoever received that amount
in USD can't deposit it in an Indian bank; not without converting it into INR
in the first place, at which point they're effectively depositing INR.

Replace USD above with any paper currency, or non-currency paper for that
matter. If you have someone willing to take a piece of paper from you in
return for something, there, you have a transaction. It's just that, the other
person would be unwise to accept a piece of paper they can't put to use.

A ₹1000 note being "not legal tender" simply means that no Indian bank will
accept it being worth one thousand INR. If someone wants to accept such notes
in return for anything, they can; they just can't deposit it in an Indian bank
(after December 30).

A ₹1000 note being "illegal" would mean that it would be a crime to possess,
offer, exchange, display, disperse, aerosolize, or apply some other action or
combination of actions to it that isn't otherwise illegal already.

And that, is not the case.

------
pksadiq
HN seems to push this link down the first page.

The link above[0] this was posted 5 (2hours for this) hours back, and have 146
(197 for this) points and 60 (108 for this) comments. How can that be?

How does HN actually work?

[0]
[https://news.ycombinator.com/item?id=12894192](https://news.ycombinator.com/item?id=12894192)

------
atxcrab
not sure about economics , but is NGC proposed ( Nano GPS Chips) a privacy
concern?

~~~
pritambaral
> NGC proposed ( Nano GPS Chips)

Such a thing is neither possible nor wise, and thus, doesn't exist. Where did
you get something like this from? Check your sources.

~~~
atxcrab
ah thanks - turns out to be a hoax -
[http://trak.in/tags/business/2016/11/08/rupees-2000-currency...](http://trak.in/tags/business/2016/11/08/rupees-2000-currency-
note-circulation-hoax/)

shouldve thought abt that first :)

------
gnipgnip
Let me throw some Zerohedge-like news into the mix.

i) Indian Banks are being setup for a collapse.

ii) India is being setup as a prototype cashless big-brother-esque society
(what with UIDAI and all).

Paranoia, yes, but well-worth it to keep in the back of the head.

------
hash-set
I am not at all comfortable with the elimination of paper currency no matter
what the rationale proffered by politicians and government hacks. Control of
people from the top down is an ever present risk and cash money has a strong
offsetting influence to the nefarious plans of would-be dictators.

Put another way: Government is not benevolent and never can be. We should all
be very careful.

~~~
fmihaila
> I am not at all comfortable with the elimination of paper currency

Then it's a good thing that paper currency is not being eliminated. Cash
continues to be legal. Some banknotes are eliminated, and new ones are
introduced.

~~~
hash-set
I came back to rub it in your face--they are in fact eliminating the higher
denomination bank notes. It is a global ploy to support an agenda that has not
yet been revealed.

