On Nov. 1, Indian Prime Minister Narendra Modi decided to ban the 1,000 and 500 rupee notes from circulation. This announcement sent the general masses into an uproar, but serves to possibly be the most effective combatant of economic corruption the area has seen.
“78 percent of transactions in India last year were made in cash,” which is 50 percent more than nations like the U.S and Britain. The usage of cash transactions has a tendency to facilitate terrorist activity, which relies heavily on cash that goes “under the books.” Perhaps the biggest usage of cash in the country, however, is for the use of political corruption through bribes and tax evasions, according to Business Day.
The institution of the ban was followed by a closure of all banks and ATMs 24 hours later. Naturally, the announcement led to a panic with many citizens not fully understanding what was occurring, leading to lines of hundreds of people gathered at a single ATM attempting to get cash out before the banks closed.
The government later announced that banks would reopen the following morning, and would allow deposits of up to 4,000 rupees a day for the remainder of the year in order to get usable currency. This effectively ends the possibility of corruption, as individuals who had relied on mass accumulations of unaccounted-for cash would have to deposit their money into the bank in order to make it useable. As soon as the cash is deposited, the income will be accounted for and taxes will have to be paid.
This initiative will bring forward an estimated $450 billion of “black money” which was previously unaccounted for. This will serve to bolster the economy, as well as effectively end corruption and put a stranglehold on terrorist organizations that stood to benefit from the larger bills.
Economists around the world are looking to see how this initiative will pan out. With the release of the Panama Papers earlier this year (https://panamapapers.icij.org/), which alerted the world to the global extent of political corruption via tax evasions, the issue of “black money” is not one that is going away any time soon. In fact, people tend to get better at doing it the richer they become. Modi’s ban on “black money” could soon become a method by which many developing nations can combat corruption.
This bill is also a silver lining in the midst of all the political chaos which has been ensuing in the past few weeks around the world. Modi came into office on a promise to end corruption and rid the nation of “black money” which served to benefit the extremely wealthy, but had yet to do anything about it. With the stroke of his pen, Modi has implemented an initiative that may have a rocky start, but has all of the potential to work. Regardless of its ultimate success as an economic initiative, this anti-corruption bill is certainly a political victory for the Prime Minister.
Gulrukh Haroon is a campus correspondent for The Daily Campus. She can be reached by email at email@example.com.