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Many of the people have suggested to stop the usage of high denomination currency in order to arrest the growth in black money, and corruption. How would it help the cause?

In India the best way to accumulate unaccounted wealth is to do transactions in cash, because there is no tracking in it. If we stop the usage of high denomination paper currency then slowly everyone would be forced to do high value transaction electronically which ensures tracking. Also as transactions are being tracked tax evasion would at the least be very difficult. (A by product could be lower taxation as the tax net will be wider). This will arrest the accumulation of unaccounted money. And as the higher denomination currency will be phased out from the market, the already accumulated money will either have to run a risk of identification, or will turn useless.

Now there are some practical problems with this suggestion. What if you want to make a high value transaction? Simple, use card payment or electronic payment systems. But many of the people do not have cards, card reader machines and electronic payment facility. For them, we have multiple SMS based payment systems available, the government just needs to certify them. We have a mobile subscriber base of 10 million and growing rapidly. Well i don’t want to say this, but soon a mobile connection would be more affordable than a square meal.

Now lets come to the second part that how this suggestion will help the cause of fighting corruption. Consider a case that one has to “pay”(?) 1,00,000 Rs to someone. Currently its just one bundle of 1000 Rs bills. Now if we don’t have 1000 Rs bill in the market, you’ll have to pay 10 bundles of 100 Rs bills.So it will be harder to transfer the money, harder to hide,and harder to continue this practice. Yes, this suggestion’s help in fighting corruption will be limited as the big people and corporate groups have many different ways. e.g. interest free loans, share transfer, donations and all. But mind it, these things are already traceable, we just need a will in the system to monitor it’s ill usages.

I do not say that this is a foolproof solution, but i still say that this is worth giving a thought. What do you say?