The surgical strike by the Government to reign in black money has naturally caught many by surprise. There are varying estimates of the extent of black money in the economy. There also are varying opinions of how much of it will get back into the main stream.
While the short- and long-term implications of the government’s move are subjects of analysis by experts, one thing is certain: Everyone has to dispose of their high denomination notes because they are no longer legal tender.
Persons holding what can be said to be small change of high denomination notes do not have any problems, but people with large amounts have gone into a huddle to find ways of legalising their hard (sic) earned black money with minimum loss.
The Famed Ingenuity of Indians
This has also brought the famed ingenuity of THE Indian people to the fore. Several novel methods have already been found and are being practiced to launder the money.
Overnight, a thriving black market to exchange high denomination notes has come into existence, where the lower denomination notes are being sold at a premium.
People are reported to be exchanging 1,000 denomination notes for as low as 600 rupees in Rs 100 denomination notes.
Besides the above, many are bargaining with small shopkeepers and street vendors to exchange their high denomination notes. Many of the shopkeepers are doing so in order to ensure some business, which is severely affected due to non-availability of legal tender.
A friend of mine witnessed one such attempt while waiting for a bus.
He saw a person alight from a long distance bus and request a ‘Rerhiwala’ to exchange a 1,000 note for 800 rupees, stating he did not have any money other than high denomination notes.
However, the ‘Rerhiwala’ did not have enough change, so he could not help.
‘Fake’ Notes and Fake ‘Loans’
The primary reason for meandering lines at the petrol pumps (which are allowed to take 500 and 1,000 denomination notes till 11 Nov 2016) seen from 8 November onwards is because the public does not have smaller denomination notes for their daily needs and they want to get some petrol filled, basically to get smaller denomination currency.
There is an extremely dangerous dimension to the attempts to exchange currency in the market. People in possession of fake currency may be making attempts to get as much legal tender as possible so that their nefarious activities continue uninterrupted.
Such persons are ready to take much lesser amounts in exchange.
It is said that Fake Indian Currency Notes (FICN) with face value of approximately 400 Crores are in circulation.
Even if part of the fake currency gets exchanged at different places, it will be a setback to the government’s efforts to prevent terror financing.
Another novel method has come to light through a social media post. Photographs have gone viral showing piles of money on tables with an accompanying caption, stating that some politicians were disbursing loans of few lakhs each to their labourers as a gesture to obviate their hardship.
Poor labour in remote area, unaware that high denomination notes are invalid, are ever so grateful to those disbursing the so-called loan.
The lender will get these notes deposited in the accounts of labourers within the prescribed limits without any questions being asked. People doing the supposedly good deed can later get the entire amount refunded after some time without attracting the attention of tax authorities.
The mad rush for gold and the steep increase in its price after the announcement is proof that a lot of black money is getting dry-cleaned through gold purchases.
Colleges and schools have started disbursing salaries to their staff in cash in advance for three months. This way, a lot of their black money will get laundered without any hassles.
Suddenly the builders are very keen to clear all past dues of construction labour which they had not paid for several months, supposedly because of slow down. At least the construction workers have a reason to feel happy about this move.
People are also resorting to depositing amounts within the prescribed limits in the accounts of their family members to overcome their difficulty.
Golden Temple Amritsar had to issue a notice that they don’t accept 1,000 and 500 denomination notes, implying that people were trying to dispose of them at religious places.
People have made train and air reservations for large amounts and started cancelling these. The government had to issue instructions to curb such activities
Human ingenuity, especially that of an Indian mind, knows no bounds. They have already found several ways of getting around the problem. Several more may be devised.
Ironically, a scheme aimed at curbing black money has already started generating it.
Hopefully, these attempts will not have too adverse an effect on the achievement of its objectives.
(Sanjiv Krishan Sood is a Retired Additional Director General of Border Security Force. Having put in over 38 years of Meritorious service, he has served along all the borders of our country with Pakistan and Bangladesh, including 8 years on LC and in sensitive Samba Sector of J&K. His interests include Border Management, Security related issues and role of security forces in Security Matrix of India, politics and humour. The views expressed in this article are his own.)
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