Prime Minister Narendra Modi's decision to scrap Rs 500 and Rs 1,000 notes for fighting black money and corruption is a bold move. But this sudden move would have implications for the people as well as economy.
- A jolt to unorganised economy - The Indian economy has the unique characteristics of a parallel unorganised economy which also contributes to employment , consumption and growth. This economy will receive a big jolt from scrapping of high value notes like Rs 1,000 and Rs 500.
- Fight against counterfeiting - Of late , the large value notes like Rs 500 and Rs 1,000 gave a big push to counterfeiting. The RBI has issued many advisories in the past against fake notes in the market. The current decision would act against counterfeiting.
- Cost of replacement - There is a cost of replacement of such notes as they comprised a big chunk of the total volume of currency in the market.
- Banks' logistical issue - People are going to flood the banks for tendering their notes for replacement. This is going to be a huge task as the banks' limited staff would have to handle huge sepentine queues with proper documentation check.
- Panic in the market - The sudden decision is all set to create panic in the market as many shopkeepers and traders would stop taking notes from public.
- Push digital currency - There is already a gradual shift from cash to cards and digital currency. The people holding genuine or ligitimate currency will be the biggest suffers from this move of the government. There is surely going to be a realisation for many to use digital currency as such replacement of high notes would become a regular phenomenon for fighting against black money and counterfeiting.