World News Tomorrow – Financial news
A shockwave went through India when on the 8th of november Prime Minister Narendra Modi announced that the people had “ 4 hours” where after cash bills of 500 and 1.000 Rupees would be useless.
These bills can be brought back to the bank and exchanged for new bills of 500 and 2000 Rupees, causing a run and the immediate consequences of long queues at the banks. Up to 4.000 in old bills can be exchanged per day, up to 250.000 Rupees total until the end of December.
All amounts above the 250k threshold will be investigated by tax authorities.
These 2 bills represent 86% of India’s cash and it is used in 90% of the cases during commercial transactions. The 2 bills are the largest denomination in India but the value is not high. A 1.000 Rupees represent almost 15 dollars according to today’s exchange rate.
The question of interest is why? As 90% of all commercial transactions involve cash it is likely there are many ways to play with money and taxes. Preventing this is one of the reasons, but fighting counterfeiting is another reason for India to pursue this course.
With a working population of around 58% and arround 3% tax payers (2015) it’s clear India is looking to rectify its internal financial situation. With small businesses and families with big savings this is a big problem as large savings or money for investments suddenly is subject to new tax regulations.
By the Editor In Chief