6 minutes reading time
I am not a fan of right‑wing communalists, but setting all those aside, this sudden currency purge sounds so stupid. But it isn't! It's absolute theatre.
I 'll leave that for you to decide.
People are acting like this withdrawal of legal tender is the arrival of Kalki. India tried in 1946 and 1978. Both fizzled. The same warning signs flashed in 2016: most “black wealth” isn’t in cash, said the Central Board of Direct Taxes (CBDT, 2012). Even the usual cheerleaders cried “anti‑poor” when RBI culled pre‑2005 notes in 2014.
Finance Ministry numbers then: roughly ₹17.5 lakh crore in notes; ~84% were ₹500/₹1000 - instantly void. At an optimistic replacement rate of ~₹12,500 crore/day, you were staring at months of cash drought. That wasn’t a bug; it was the plan’s spine snapping in public.
I would higly recommend you to skip this paragraph, read the Wikipedia articles on Money, Currency & legal tender and then just move on to next paragraph. The way we do our transactions have always evolved, but it was a slow process and it was quite natural. When we had barter system, a monarch didn't come out on a fine day to announce a currency. People involved in transaction decided on a common material that was to be used instead of barter. That common material, whether it was bronze or gold or silver was in use for quite sometime before it started to bear the seal of the monarch. That seal added to the authenticity to the coin. It is quite possible that these early coins might have been the objects used in rituals and prayers, probably issued by a priest.. Long story short, it took millennia before the coins started to bear the value of fiat money. This is when the governments started to control the money.
When the banks became prevalent, they started to issue banknote, which was supposed to be exchanged for the money as per face value. So when banks issued these banknotes, they always had to ensure that they were capable of exchanging these notes for coins. This was going fine, but it wasn't uncommon for the banks to become bankrupt. So government interfered again and appointed the central bank to issue the national banknotes. These then became legal tender. All hell broke loose... These national banknotes no longer have backing in gold/silver, not even coins, but can be just traded for their face value of fiat money. Legal tender is any official medium of payment recognized by law that can be used to settle a trasaction like extinguishing a debt, or meeting a financial obligation.
Though this story about money was boring and irrelevant, it is important that one understands the difference between money and a legal tender. If these 1000 and 500 INR notes cease to be the legal tender, they are still banknotes, aka promissory notes. The RBI governor has signed that they promise to pay the bearer. These RBI issued notes doesn't specify to pay on a specific date nor an expiry date, hence they have to pay on demand. There’s a difference between legal tender status and monetary value. A note can stop settling debts and still be redeemable. The instinct here was right; compare with the Bank of England’s continued redemption of old series. But the prophecy is this: when the state flips the “contraband” switch, calm dies first. India’s design turned notes into quasi‑contraband overnight; predict the queues, the hoarding, the barter.
I have accepted about 15000 INR from fellow people in denomination of old 500 INR and 1000 INR RBI Gandhi series notes and wired them the face value of the currency and I did it after 09-11-2016. If you are a government official and if you want to contact/arrest/sue me, please email to [email protected]. I promise that I won't forward those messages to /dev/null. ;)
Black money purge? Rich bastards are smart. They will route cash through benami fronts, shell firms, bullion, wedding bills, and cooperative funnels. The poor will stand in queues, lose wages, and get scolded for not being “digital” enough. Expect almost all cash to crawl back into the system because laundering loves a deadline. Even a kid knows the real hoards sit in havens and balance sheets, not under mattresses; so why this sangi stunt - why did this Modi thaayoli swing a hammer at wallets and call it reform?
Counterfeit crackdown? Security features were barely changed in the rush (The Hindu, Nov 2016). And no, there isn’t a magic GPS chip hiding in the ₹2000 note - even the Finance Minister had to swat that rumour down (NDTV, Nov 2016). Terror finance and Naxal cash? You’ll get a brief hiccup; systems adapt faster than ATMs refill. Growth and jobs? Watch the informal sector take the punch first, then the charts will discover it months later.
One would suspect that militants would have had quite a large sum of cash in their reserve, but one would be overlooking the fact that most of those such militant groups in India live intertwined with the local community. Though it will certainly pose some trouble, they should be able to distribute the cash and get it converted to new currency.
If the RBI had improved the security features of the note, we could have hoped that the forged currency could minimize; but they had no time
If only ~6% of undisclosed wealth lives in cash (CBDT’s own line), why bulldoze the poor while NPAs rot and big‑ticket evasion struts? Call it theatre for control: push digitization without rails, surveil flows, flex state muscle. RSS/BJP will spin it as moral cleansing; the cost will be paid by people far from banks. Intentions aside, the design punishes the informal and rewards those with proximity to banks, accountants, and time.
I’ll close with this: this was not a war on black money; it was a stress test of obedience. The bill arrived in lost wages, shuttered shops, and quiet funerals. The prophecy was simple: systems built on spectacle eat the smallest first.