'The common man in India who doesn't have anything to hide will have to put up with this short period of discomfort.'
'It will not last more than 10 days at the most,'
The prime minister sprung a huge surprise on the nation on Tuesday night by banning Rs 500 and Rs 1,000 notes. Though the public is shocked and perplexed, bankers and economists call it a bold decision which will only benefit the nation.
P Balagopala Kurup, a retired general manager of the Indian Overseas Bank, tells Rediff.com's Shobha Warrier why he applauds the decision.
Do you consider this a historic moment which took everybody by surprise?
It is definitely a watermark and I have no doubt about that. Yes, it did take everybody by surprise.
The homework was done very systematically and things were in place when he announced it to the nation.
The confidence he had in the few people who were behind the project is indescribable, and the way he sprung it on the nation, surprising everyone without anybody getting a hint, is commendable.
Do you think the inconvenience the public feel right now is only for a few days and after that, everything will stabilise?
They call it a surgical procedure. Any surgical procedure will create some discomfort for the patient till he gets healed.
I think the common man in India who doesn't have anything to hide or anything to fear will have to put up with this short period of discomfort and it will not last more than 10 days at the most.
In the long run, the implementation of GST (the Goods and Services Tax) and demonetisation together will be good for the Indian economy.
By scrapping Rs 500 and Rs 1,000 currency notes, will the prime minister be able to ease out black money from the market?
There are two things here. If we go by the hypothesis that most of the black money is in currency and most of it is in Rs 500 and Rs 1,000 notes, all of this will have to come to the bank.
There is no other way they can use this money other than by bringing it to the mainstream which is by either crediting into their account or getting them exchanged with the new currency notes.
So, the entire currency will come into the system.
Once it comes into the system and into the accounted part of the Indian banking, then the government can pursue further and find out the source.
The second part, which is also commendable, is that if there are any fake notes, they cannot use them anymore except try to push them to the banks.
The chances of these fake notes getting detected by the bankers is higher.
So the possibility is that the black marketeers will destroy the fake notes or they will try to push them to the banking system.
If both these issues, black money and fake notes, are handled properly, they can be resolved successfully in one shot.
Since the person depositing the notes will have to identify herself/himself and disclose the source, do you think black money will come out into the system, or will they become just useless?
Either way, it serves the purpose.
If they choose to destroy the money, and not use it, it will help the economy as the amount of currency in the market will come down.
Suppose they decide to put into the bank account, the money that was hidden from the eyes of the law will come out into the open.
How will it affect the Indian economy in the short term?
It is going to create inconvenience in the short term for those who are involved in heavily cash involved transactions like marriages and the construction industry.
Yes, they will be inconvenienced right now as most of the transactions are done in cash.
Other than that, there shouldn't be any problem as ATMs will be open after two days. Rs 4,000 per day is a reasonable amount.
In the case of the banking industry, other than the extra work load, there is no other inconvenience. They will have to only burn the midnight oil.
I call this a temporary inconvenience. I go back to the example of surgical procedure. You will have some inconvenience after a surgery, but you will recover well.
Those who were using black money will feel the pinch, definitely.
And in the long term?
Definitely, it will be helpful for the economy in the long term.
Is Rs 2,000 a high denomination for a country like India?
I remember in my early days in the banking industry, we had Rs 1,000, Rs 5,000 and Rs 10,000 notes, and in 1978 they were demonetised.
In those days, in all our banks (Indian Overseas Bank branches) together in Kerala, there were hardly about 200 to 300 such notes.
Today, people are comfortable using high denomination notes. Even among the lower income groups, they do deal with Rs 500 and Rs 1,000 notes.
The advantage of Rs 2,000 is that it is a new denomination and there will not be any exchange of old notes for new notes. That seems to be the idea.
Do you call this a very bold decision?
It is a very bold decision and it will boost the image he has portrayed, as a man who is not hesitant to take bold and necessary steps.
The general picture that we have of political parties is that they do not want to rock the boat and do not want to inconvenience the idle rich who contribute to political party funds.
Definitely, it is going to hurt those people who normally make heavy contribution to political parties.
It shows that the government doesn't mind antagonising them in the larger interest of the country.
I am very happy that the government took such a bold decision taking everyone by surprise.
IMAGE: Prime Minister Narendra Modi on the charkha before the National MSME Awards at the Punjab Agricultural University in Ludhiana. Photograph: Press Information Bureau