DEMONITISATION OF 500 AND 1000 RUPEES NOTES

Merits:
1. Infusion of cash into the banking system which is main stream of economy
2. Will bring down the lending rates and cost of capital to the industry
3. Industrial growth and there by resulting in increase of GDP
4. Employment generation to a large extent
5. Tax collection will be increased and transparent
6. Better infrastructure for the country
7. Irrigation projects for agriculture and helps in growth and better living standards for farmers and rural people and
contribution to GDP as well
8. Due to increase in Industry growth and Agriculture and employment generation, the purchasing power of the
consumer will increase so the demand and production
9. Direct and indirect tax rates will come down due to transparency and increase of tax base which again will contribute
increase the purchasing power of the people
10. Inflation will come down substantially as the block money is reduced from the system
11. Completely eliminate the fake currency
12. Will curb on corruption as the block money is removed
13. Reduction in crime as it is obviously funded by block money
14. Will be a big curb on terror activities as these are funded by fake and block money
15. Drug trafficking will take a big hit
16. Welfare activities of the government will be boosted help the poor of this country
17. Internal capital is generated and dependency of FDI will come down
18. Rupee will strengthen against the dollar
19. Luxurious goods demand will come down and production of common man products will increase bringing the prices
down due to competition
20. Prices of Real estate which is the highest block money hoarder will down substantially making homes affordable to
common people and rents also will come down
21. Demand for the gold in India will come down as the much of the gold is bought out of block money thereby reducing
the import of gold which is unproductive
22. Due to fall in gold import foreign exchange reserves will increase and strengthen the rupee
23. Defence budget can be boosted thereby addressing the national security
24. Poverty can be eradicated
25. The gap between rich and poor will come down substantially
26. Election process will be transparent flow of block money will be eliminated to a large extent, criminals in politics will
come down, honest people and professionals can easily enter politics. State funding of election can become true
27. Spending habits of the people will change, like spending huge money on marriages and other social functions which
are not productive
28. Online transactions will increase and transparency is protected
29. Use of luxury cars will come down thereby bringing down the fuel consumption so that the pollution will come down
and reducing of import of oil and saving the foreign exchange
30. Revenue of the banks will increase substantially will be useful to increase the number of branches across the country
including in the rural areas bringing the financial inclusion
31. Due to increase of black money and fake money terror network from Pakistan is able to control or blackmail our
bureaucrats and politicians, this move hits Pakistan and terror network
32. Media cannot run on paid news funded normally out of block money and brings ethics and reliability
33. Housing is meant for living of people not for investment to earn profit, this objective will be fulfilled. Affordability in
housing and thereby housing for all will be achieved
34. Gold is for Jewel not for investment this objective will be achieved
35. Investments in formal stock markets will increase, which is productive investment for the country
 36. Agriculture land is meant for cultivation not for investment, as the land cost comes down. Now a days people are
buying the agricultural land with block money as investment and not using for real cultivation which is bringing down
the agricultural production, this will be discouraged.
37. Bank credits will be more accessible for common people
38. Land cost will be less for government projects like irrigation, roads, etc.

Issues:

1. Why Sudden action: This kind of decisions should be sudden if you make any pre-announcement, people will convert
their block money into lower denominations or gold or something else, thereby very purpose of the scheme will get
defeated
2. Why 2000 Rupee notes: The government cannot order the printing of new 500 and 1000 rupee notes before
announcement, as it will leak to the people that notes are going to be changed, printing of 100 Rupee notes will not
meet the demand
3. Long queues: as the printing new notes has not been ordered earlier and distribution takes time, government should
use air force to transport and special counter for exchange like income tax counters, even in open grounds as we
need not require bank account access you just need to check the currency and give new notes with just access to RBI
exchange online application
4. People should avoid repeated exchange unless necessary to accommodate for others. Ink mark will help as in case of
voting
5. NGOs and Volunteers should come and help people to manage lines and facilities like water butter milk, chairs, etc
6. Special bank counters should be open at major private hospitals as well
7. Mobile banks and mobile ATM should be operated
8. Going forward more and more bank branches should be opened and Post offices should take bank role, all
government payments should be online, people should train people around on online process. Cash transaction limits
should be imposed
9. In future maximum denomination should be 100 and other notes should be exchanged with enough time to the
people without any exchange limit. Highest denomination in US is 100 and UK is 50 for last so many years
Conclusion: When terrorist attack happens in Mumbai, roads were blocked for 3 days to eliminate the terrorists, big
inconvenience and sudden but need to be supported then only the people and the country can be safe.
Request all the people to stand united as it is a major reform which requires lot of guts and determination. The
execution is extremely difficult without pain and a massive program considering the size of our country. Let us support
our Prime Minister and help each other to take our country forward. We have to do fasting if required

Jai Hind

CA. K Madhu Sudhana Rao

Chartered Accountant
Chennai