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'This is also a war against Pakistan'

November 09, 2016 15:20 IST

'This is not only a fight against corruption and black money, this is also a fight against terrorism and counterfeit currencies.'

Reserve Bank of India 

 

"This is a massive war on corruption," chartered accountant and financial expert M R Venkatesh tells Rediff.com's Shobha Warrier.

Do you feel the decision to demonetise rs 500 and Rs 1,000 notes is a game changer?

It is not only a game changer but a momentous event that happens rarely.

I think this is an event that has captured the imagination of people, like when Indira Gandhi nationalised banks in 1969.

This is a massive war on corruption.

Won't the people be inconvenienced?

Yes, there will be some inconvenience. Banks also will have some problems, but all this is temporary.

You have to also understand that the penetration of credit cards and debit cards has increased tremendously in India.

For a man who files his income tax returns without fail, this is not going to create any problem.

How do you think the decision will bring black money into the market?

Let me talk about corruption first.

Think of those who take bribes or accept bribe in lakhs.

Is it possible to give or accept bribes of Rs 25 lakhs in Rs 100 denominations?

So, this is going to be a huge problem for those who give and accept bribes as bribe giving and bribe taking will become physically difficult.

$100 is the biggest denomination in a country like America.

Why should we have currency higher than Rs 100?

I am not saying this will eliminate corruption; this will make corruption very difficult.

What about the Rs 2,000 notes the government is going to introduce?

They are special notes which you cannot hoard for several years. They can be tracked due to its special features.

This is not only a fight against corruption and black money, this is also a fight against terrorism and counterfeit currencies.

This is also a war against Pakistan.

I am sure an ordinary person in this country will be happy to be a part to fight this war against black money, corruption and terrorism.

How will this decision affect the Indian economy?

Short term, there will be pain, confusion and even a crisis, but that will be temporary.

There may be demand and there may be supply, but both may not be able to meet because the currency is not there.

But only for two days.

After that, the banks will reopen and the ATMs will function.

You can also exchange the Rs 500 and Rs 1,000 notes.

By December, things will be alright, I am sure.

Long term effect?

Corruption will come down dramatically.

I would say in 3 to 6 weeks, you will start seeing the benefits of this decision.

It is said the real estate sector which thrives on black money will suffer the most...

Why only real estate?

The education sector thrives on black money.

The medical sector too.

The city of Delhi which survives only on liquid cash will also suffer.

The biggest economic activity in Delhi is giving and accepting bribes.

Everybody from lawyers to chartered accountants to journalists to IAS officers to the entire political class gives and take bribes.

For the political parties that thrive on black money, this is a blow. So I would call it an electoral reform.

In fact, this is real estate reforms, income tax reforms and political reforms too.

Photograph: Danish Siddiqui/Reuters

Shobha Warrier / Rediff.com Chennai