How some of our Currency become piece of paper overnight

The demonetization of INR 500 and INR 1000 Indian Currency Note has come as a surprise to everybody. Whatever change is going to happen, but, this is the first time in my life when I have sensed that a person who is living on his liabilities, honesty and morality is feeling safe in this country. “Honesty is the best policy”, the saying, in fact, is now making much sense for the Indians. But, this isn’t the only change, which made Narendra Modi’s mind to take such a huge step, there were a lot of factors that bound him to do this. So what was that? Why this decision came into effect so sudden? Is it for unaccounted money? If yes, then what kind of effect will be seen, if that black money will become white or get captured by the country’s central body institutions. So many questions are raised.

Despite possessing legal earnings, Indians (Mostly in rural areas) accumulate their makings either at their home or lend them to the nearby surroundings. Even in the 21st century, when the banking network has spread more or less in every small area, money lending, the oldest form of business, is still effective in many areas.

With these changes, people who have a lot of legally earned cash in their pocket or at home, will have to deposit it in the bank before the date proclaimed by the government (30-Dec-2016). As it is legally earned money, it will surely be deposited in the banks (with id proof) and this will let the banks house surplus amount.

Now, talking about black money basically found in large digits i.e. crore or more than it undoubtedly carry INR 500 and INR 1000 currency notes, acquired through unrecognized or illegal ways, has no option other than to be destroyed or to be deposited. But, for considering the second option, they have to disclose it as legal income and have to pay heavy tax on it. So, how they’ll make it possible with these legal boundaries.No matter, if they found a way to make their income legal or they just get frightened, they have to pull out all the money that is not under the account of Indian government. Later on, it will help to minimise the total currency circulation in the Indian economy. As the currency circulation will be reduced, the inflation rate will also become negative, it is known as deflation. Although, deflation leads to unemployment problem, it increases the internal value of money as well.

So, the bottom line is: The demonetization of INR 500 and INR 1000 currency notes is such a positive move for the Indian economy as well a good lesson to those who are playing with Indian taxation policy. 

By:

Priyanka Sinha

Student, INLEAD

A more equal currency

I borrowed this blog’s title from a newspaper story I read recently with the headline “A more equal dollar now”. So, what is a dollar equal to now? To rupee, pound or euro? Well none of these.

USA has made quite a few changes in their currency bills over the years to stay ahead of counterfeiters. This April 2016, after 10 months of heated debates, Treasury Secretary, Jacob J Lew announced the changes in $20 bill. There would be changes in $5 & $10 bills subsequently. The $20 bill will have the image of Harriet Tubman, an African American woman who was born a slave and eventually helped hundreds of slaves escape chains using the Underground Railroad. 

Equality here symbolizes women like Tubman as well as leaders of suffrage movement like Lucretia Mott & Sojouner Truth who are getting represented on currencies and replacing traditional faces of men like those of President Andrew Jackson, who has of late found disfavor amongst Americans due to his role in the 1830 Act on Removal of Indians (Native Americans).

Countries that have used images of women in their currency bills:

While USA has a brief history of women on its currency and India has none on a bill, (we do however have image of Indira Gandhi, our fourth Prime Minister on coins), there are quite a few nations across the globe that have been printing women’s faces on their currency bills.

The first country that comes into mind is interestingly Syria which as a nation has an image of being completely warn torn and struggling against a violent militant group, ISIS. They have Queen Zenobia, known for fighting against Roman colonisers in the 2^nd century AD, on their 500 pound note.

Philippines in 2009 added the image of their erstwhile first female president, Corazon Aquino, in their 500 peso note. In Turkey the 50-lira note features the image of women’s rights activist Fatima Aliye.  Mexico features the image of its prominent artist Frida Kahlo. The image is from her famous self-portrait made in 1940. Argentina, South Korea, New Zealand, Israel, Sweden, Australia, England are some other countries that have images of women on their currency bills.

So is there need for Gender Equality in currencies as well?

And why not? If we delve into our own country’s history we have many women who have played important roles in every sphere of life. Each of them deserves a stamp and an image on the currency bills. Since the currency denominations are very few, we could add some women in the list which technically has just Mahatma Gandhi as the only image of a person on our currency bills, since independence. It’s time we recognized Sarojini Naidu, Annie Besant or even Rani Laxmibai and gave them their due spots in our currency.

- Ms. Monica Mor

  Sr. Faculty, INLEAD

Bitcoins – are we ready for digital money?

The digital wave has hit the humankind like never before. Everything from shopping to booking our tickets to ordering food has all gone the digital way. We have actually become so dependent on technology that what was made as a way to help us, has now become a way of life for most of us. So, it comes as no surprise that man in the name of development has also given birth to a special kind of digital currency called Bitcoin. Don’t know what it is? Here, read the article and find all the answers you have been looking for.

What is Bitcoin?  

Bitcoin is a form of digital currency, created and held electronically. It’s unit for representation could be BTC, XBT or ^.Small amounts of bitcoins used as alternative units are called millibitcoin (mBTC), microbitcoin (µBTC) and Satoshi. The Bitcoin protocol was formulated as a payment system by Satoshi Nakamoto, supposedly a Japanese, in 2008 and the open source code for the same was shared online in 2009. There is a mystery behind the creator’s identity, to the extent that it may not have been a Japanese and that it’s a group of creators, and not just one.

How do they work?

Bitcoin uses peer to peer technology to operate with no central bank or authority. Managing transactions and issuing Bitcoins are collectively done by the network. To use a Bitcoin, one needs to install a Bitcoin wallet in his computer / mobile phone. Bitcoin wallets keep a secret piece of data called “private key” or “seed”, which is used to sign transactions and serves as a proof of the authenticity of transactions.

“Block chain” is a shared public ledger on which the entire Bitcoin network relies, and all confirmed transactions are included in the Block chain. The transactions are confirmed using Bitcoins via a process called “mining”. Mining enforces a chronological order in Block chain, protects neutrality of the network and prevents users from rolling back their spends and misusing or reusing the Bitcoins.

The rise of Bitcoins 

Over time, Bitcoin as a form of payment for products and services has grown, and merchants are incentivized to accept it as the fees are lower than the 2-3% levied by credit card processors.

The problem

The European Banking Authority  and  other sources have warned that bitcoin users are not protected by refunds or chargebacks (returning of funds to consumer by the charging bank for settlement of debts). In retail transactions, however, this cryptocurrency does not hold much momentum. The use of Bitcoins by criminals has attracted the attention of many regulators, legislative bodies, law enforcement and  media. In 2012, a study stated that 4.5% to 9% of all transactions in Bitcoin were within Deep Web (a world wide web that exists on ‘dark net’, which overlays the public internet) also called Silk Road, where one can access sites on child pornography, murder-for-hire and  weapons purchase. Then, there have been many instances of Bitcoin Ponzi (fraud) schemes as malwares also started stealingusers’ Bitcoins.

Coming closer to India, The Reserve Bank of India has often issued warnings against usage of Bitcoins as it may leave users exposed to financial, legal & security related risks. Despite these warnings, Bitcoin has been gaining currency in India and quite a few trading platforms have sprung up catering to Indians wanting to purchase Bitcoins for Rupees.

The Big Question

But the question still hangs in the air: Are we ready for a digital currency? Maybe, not right now. However, going forward we may be more open to using digital currencies or cryptocurrencies, if there are enough protective firewalls in place and, when we become increasingly environment conscious and work towards printing less currency notes.

What’s your take?

-Monica Mor

 Senior Faculty, INLEAD 

Images Courtesy- Google Images