1978 Demonetization, A look into the History

img_4252In 1977, the Janata Party coalition government came to power and in 1978 decided to withdraw 10,000, 5,000 and 1,000 rupee notes notes by issuing an ordinance.

It was not favoured by the then RBI governor I.G. Patel. In the book “Glimpses of Indian Economic Policy: an Insider’s View”, the Governor was informed by the finance minister H.M. Patel about the decision to withdraw high-denomination notes. Patel immediately pointed out that such exercises seldom produces striking results.

According to Mr. Patel most people who are tax evaders and recipients of black money don’t hoard their ill-gotten earnings in the form of currency for long.

Patel added that the idea that black money or wealth is held in the form of notes tucked away in pillows or ceilings or drains is naive.

In any case even those who are caught waiting will have a chance to convert notes through paid agents as some provision has to be made to convert at par notes tendered in small amounts for which explanation cannot be reasonably sought, he added.

In a recent interview with a senior journalist he rightly remarked, “When a $20,000 of a Louis Vittion bag can be forged what is 2000 Indian rupee note. I’m confident of the security features they have put in are state-of-art, but hadn’t they said the same thing when they issued a Debit Card. Yet 3.2 lakh cards were compromised as per reports.”

In a recent public address, Modiji said that it is only an inconvenience for a few days, but how would he know the magnitude of this inconvenience unless he stands to exchange 4,000 and withdraw money everyday to run chores. It is only the poor who are standing in the queue not the rich. Not A.Raja’s and Suresh Kalmadi’s of the world.

The agenda sold during the election campaign was to bring back black money from abroad within 100 days. However Lalit Modi and Vijay Mallya ran abroad with Black Money and the govt. did nothing and here we are scared in our own houses with legit money.

We were promised transparent pricing, crude oil has become 1/3rd the amount it was when the current ruling government came to power, however there has been only 20% reduction in retail prices.

So the agenda now sold is that we are making sure that this will the end of all terrorist activity and corruption in India. We don’t have to worry about anything more and it a little difficult to digest that none of the ministers in the ruling government are queueing up to exchange notes otherwise it would be news.

While the intention is GREAT and we welcome the move, but sadly it was created by people only because the Govt. of India allowed it through inefficient measures in place or corrupt officers.

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