Real story behind Rs 2000 note ban by RBI

The real story behind the Rs 2000 note ban by RBI is a complex one.

There are many different perspectives on the issue.

However, the significant impact will be on businesses that sell alcohol in India, including state governments in India. Since most alcohol purchases happen via cash, which often does not get converted into white money, alcohol company stocks might take a hit. The other major sector that will take a hit is real estate where it is speculated that 50% of the transaction value is dealt with cash. Another sector is jewelry and luxury cars.

Some people believe that the note ban was a genuine attempt to crack down on black money and corruption. the new Rs 2000 note ban would make it more difficult for criminals to operate.

Others believe that the note ban was more about political grandstanding than about actually tackling corruption. They argue that the move was designed to appease the public and to distract from other problems facing the government, though RBI reduced printing the note for the last 5 years.

It is also possible that the note ban was a combination of both of these factors. It is possible that the government was genuinely concerned about black money, but that they also saw the opportunity to use the issue to their political advantage.

Key arguments for and against the Rs 2000 note ban:

Arguments in favor of the note ban:

  • The note ban was a necessary step to crack down on black money and corruption.
  • The new Rs 2000 note would make it more difficult for criminals to operate.
  • The note ban would boost the economy by encouraging people to deposit their black money in banks.

Arguments against the note ban:

  • The note ban was a disruptive and inconvenient measure.
  • The note ban will lead to a sharp decline in economic activity.
  • The note ban did not have a significant impact on black money.

The truth about the Rs 2000 note ban is likely somewhere in between these two extremes. It was a complex issue with no easy answers.

Rs 2000 note ban

Image credit

Reserve Bank of India, GODL-India, via Wikimedia Commons
Foreign domestic helper.