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Earlier this month PM Modi announced that the current 500s and 1000s notes will be scrapped. They call a fight against corruption and black money, as it is easier to collect black money in 500 and 1000 notes form. Many debates and discussions have been going around; many speak for this demonetization , yet a few feel that this is not a solution to flush out black money. According to some news channel, those who had black money are requesting others to deposit their money and in return take some proportion of it or we hear that old notes were thrown into rivers or dustbin. It is predicted that the price of real estate is likely to go down, and it is the hardest hit industry. People are allowed to deposit their cash up to a limit. ATM’s have never ending lines now.
Whereas this is not the sublime Indian currency has been demonetized. Currency notes were earlier scrapped in the year 1978 By BJP government, PM Moraji Desai.
On 16 January 1978, Moraji Desai announced to the nation to scrap Rs 1,000, Rs 5,000 and Rs 10,000 notes. Two days earlier, R Janaki Raman, a senior official from chief accountant’s office in RBI, was informed about the government’s decision of demonetization of 500 and 1000 notes and was asked to draft the ordinance. The ordinance was then sent to the then president N Sanjiva Reddy, and the decision was announced on the All India Radio. The Governor of RBI IG Patel was not for this move as he saw this as a right move towards only the big politicians. At that, the frozen notes were a gigantic amount even for a very wealthy person. Despite announcing the news on All India Radio, it took a while for the news to spread as there was no internet, Whatsapp, facebook,twitter and TV was also not available to everyone.
The exchange system back then was also very rigid as the time was only 3-days and it could be exchanged only in RBI and SBI banks.
This was the demonetization of 1978. The currency was first demonetized in 1946
Let’s go to the archives of 1946, a year before Independence and see how demonetization was different from today and 1978.
In Jan 1946 the government came out with two ordinances on 12 Jan 1946. The first law asked banks to provide information about currency notes o Rs.100, Rs. 500, Rs. 1,000 and Rs.10,000. Second was about telling public that denominations of Rs 500 and above were scrap. People were given ten days in the exchange, which were later extended. The scrapping of notes was only applicable to British India. This step was called as “conversion,“ at varying rates of profit and losses than demonetization.