India shocked at move to halt black money trade

Months of planning by a select few sworn to secrecy and then cash-laden trucks on the streets.

But this was no bank robbery rather an audacious plan to issue new notes across India.

There are 1.25 billion people in India but only a handful were aware that on Tuesday night Prime Minister Narendra Modi would announce the shock withdrawal of 500 and 1 000 rupee notes (R104, R208) from circulation.

The assault on “black money”, which stunned the country and saw large queues form outside ATMs and banks, was carefully planned over six months by a group of Modi advisers.

The prime minister had become convinced that he needed a headline stealing move to underline his determination to check rampant tax evasion and settled on scrapping the two highest denomination bills.

Only Finance Minister Arun Jaitley, the Reserve Bank of India governor and a few close officials were in the know until the very last minute, according to India newspaper reports.

“If secrecy had failed people would have invested most of their cash in hawala rackets [informal lending system], gold or real estate before the announcement, worsening the black money issue,” investment analyst Paras Savla said.

After closing for a day, banks started reissuing new 500 notes and a new2 000 rupee note yesterday.

Last week, the Reserve Bank of India had ordered banks to issue more100 rupee notes but no one seemed to have twigged about what was in the offing and Modi pulled off the boldest stroke of his premiership.


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