The whole country was taken aback when Prime Minister Narendra Modi on November 8 announced that the currencies in the denominations of Rs 500 and Rs 1,000 will be invalid post midnight. However, the lower denomination –Rs 10, Rs 20, Rs 50, Rs 100 and coins –will be valid. He further announced that new notes of Rs 500 and Rs 2,000 would introduce shortly. Thus, giving millions of Indians a panic attack.
But what do you think was this the first time an Indian currency was banned of a sudden?
Well, the answer is NO. A look into the past will make you realise that India is no new to demonetisation. Demonetisation has been implemented twice -1946 and 1978 – in the past.
The first currency ban:
In 1946, the currency note of Rs 1,000 and Rs 10,000 were removed from circulation. The ban really did not have much impact, as the currency of such higher denomination was not accessible to the common people. However, both the notes were reintroduced in 1954 with an additional introduction of Rs 5,000 currency.
Rs 500 and Rs 1000 notes were introduce in 1934 and after four years in 1938, Rs 10,000 notes were introduce.
That came in 1978; the then Prime Minister of India Morarji Desai announced the currency ban taking Rs 1000, Rs 5000 and Rs 10,000 out of circulation. The sole aim of the ban was to curb black money generation in the country.
Similarities in 1978 and 2016 ban:
- The note ban by Morarji Desai also aimed to drive away black money out of circulation in the economy. Hence, The High Denomination Bank Notes (Demonestisation) Act was implemented.
- Narendra Modi announced the currency ban is an address that was broadcasted across all news channels. Similarly, Desai announced the ban over the radio after which the banks were closed the following day.
- Both the affairs were kept confidential.
Differences in the ban:
- Unlike Modi, Desai didn’t have the backing of the RBI Governor. The Governor I.G. Patel believed that the ban was implemented simply to immobilize the funds of the opposition party. Patel also believed that people never store black money in the form of currency for too long.
- It didn’t have much effect on the people and affected only the privilege few. While the recent ban had shaken the whole country.
Coming back to 2016, there is also a buzz that smaller denomination currency notes like Rs 50 and Rs 100 will also be replaced by incorporating new features and design. And that reminds us of an incident dating back to early 70s, when there were rumours of withdrawing Rs 100 note from circulation, and immediately hoards of people were seen rushing to banks to exchange their Rs 10 and Rs 20 currencies.