The sudden and abrupt announcement by the government to make the
currency notes of INR 500 and INR 1,000 invalid as legal tender
from mid night of 8 November is part of the government's
attempt to crack the whip on black money, fake currency and counter
terrorism. The currency of the aforesaid denominations constitutes
around 86% of the total value of the currency in circulation. The
government has relied upon Section 26(2) of the Reserve Bank of
India Act for its action, which empowers the government to declare
that any series of bank notes, of any denomination, shall cease to
be legal tender through a gazette notification.
The demonetization saga was unveiled after disappointing
collections were made under the Income Disclosure Scheme (IDS),
which provided people with the option to disclose unaccounted
money. The impact of this questionable move has been felt across
various sectors with differing intensities and which may linger for
an inordinate period of time.
