With a shock order India has decided to withdraw the 500 and 1.000 rupee notes, the most important ones in circulation, to fight corruption and the black currency market. The provision was given yesterday on TV by Prime Minister Narendra Modi. The 500 and 1.000 rupee notes – the largest denomination is worth around 15 euros – have officially been out of circulation since yesterday evening and can be exchanged at the bank or at the post office until 30 December. To make this transition quickly and avoid bank runs, credit institutions were closed and ATMs blocked. A choice that threw the country into chaos given that almost all the shops immediately stopped accepting the "offending" cash while many families do not have the money in the house in other denominations necessary to buy basic necessities in these hours. The government has promised that it will issue new 500 and 2 rupee banknotes within a few days.
Indian stocks opened down 6% in the wake of this news and the news of Donald Trump winning the US presidential election. Immediately after Modi's statements, queues formed at ATMs to withdraw cash before they closed. The executive's choice, illustrated by the prime minister on video, is clear: to scrap cash to fight terrorism and tax evasion in the country. The two coins removed from circulation are those of the highest denomination and represent 84% of the liquidity mass. Due to their characteristics, they are those used to accumulate and hide treasures in the house that one wants to escape from the eyes of the taxman. Suicidal operation from today given that on New Year's Eve this money will be waste paper. Not only. These banknotes are favored by counterfeiters. And anti-India terrorism, the government believes, has often been financed through these channels in the past.
