Why demonetisation won’t curb black economy?
Govt. of India’s recent move to demonetise currency notes of Rs 500 & 1000 notes will definitely help in curbing terror funding & fake currency circulation by SAARC nations to India.
It is a regular practice by RBI to take out old currency notes after a period of time to check fake currency notes circulation in the economy.
But this measure by Govt. against corruption & black money would be effective is debatable.
The basic thing is “Black money is in flow”. Gone are the days when people used to keep their black money at Home.
If you know any corrupt bureaucrat or politician personally then you will surely get the point I’m going to explain below:
## Money in circulation
Even Black money is in circulation. It is not in the “stocked” form as it used to be earlier.
Heavily invested in:
– Gold & Silver & luxurious items
– Construction of House (people spend quite a lot of their unaccounted money when constructing the house)
– Share Market.
Through tax-havens it is brought back to India to invest in Capital Market.
P.S. 1. I’m not denying that people don’t keep their unaccounted money in cash. They do. But it is not comparable to what they do in non-movable & luxurious because they generally act as assets & hence one receives dividends in purchasing them.
P.S. 2. In strict terms it is not demonetisation of currency notes as new notes of same denominations are availed by RBI to banks & post-offices to be distributed to people. It is exchange of older notes with the new.
P.S. 3. The only way to ensure there exists no parallel economy aka black economy is by putting a check on generation of black money.
With Great Love,
Er. Amit Yadav