How do you view the Indian government's decision to fight "black money" by scrapping 500 rupee and 1000 rupee notes?

The Indian government's decision to scrap the 500 and 1000 rupee notes in 2016 was a bold move aimed at combating "black money," corruption, and terrorism. Here's a balanced view of the decision:

Objectives and Implementation

• Objectives: The primary goals were to curb black money, reduce corruption, and counter terrorism by rendering large denomination notes useless, thereby forcing hoarders to deposit them in banks, which could lead to investigations and taxation12.
• Implementation: The decision was sudden, with the Reserve Bank of India (RBI) and banks not fully prepared, leading to significant cash shortages and long queues for exchanging notes15.

Economic Impact

• Short-term Challenges: The move led to a severe cash crisis, impacting small businesses and daily wage earners. It resulted in a temporary slowdown in economic growth and industrial production5.
• Long-term Goals: The government hoped to increase digital transactions and financial inclusion. While digital payments did rise, the overall economic benefits were debated35.

Effectiveness Against Black Money

• Outcome: Approximately 99% of the demonetized notes were returned to banks, indicating that most black money holders managed to deposit their cash without facing significant penalties45.
• Criticism: Critics argue that the move did not effectively target black money since most of it is held in forms other than cash, such as real estate and jewelry15.

Social and Political Reactions

• Public Response: The decision faced widespread criticism and protests due to its disruptive nature and the hardship it caused to many citizens, particularly those without access to banking services5.
• Political Impact: The move was seen as a bold step by the Modi government to tackle corruption, but its execution and effectiveness were questioned by opposition parties and economists25.

In summary, while the decision was intended to tackle significant economic issues, its execution and outcomes were mixed. It led to short-term economic disruption but did increase digital transactions. However, it failed to effectively reduce black money as most of it is not held in cash form.