India withdraws big bills from circulation
Indian Prime Minister Narendra Modi ordered the withdrawal of 500 and 1,000 rupee banknotes from circulation in a bid to combat corruption and counterfeit currency, Reuters reported.
The goal is to bring billions of dollars worth of cash into the subcontinent’s economy, plus deal a blow to Islamist militants who allegedly use fake 500 rupee notes to fund terrorist activities in India. This amount of money is not large -- 500 rupees are worth just $7.50 -- but it’s their illicit use that’s at issue.
“Black money and corruption are the biggest obstacles in eradicating poverty,” Modi said in announcing the surprise move on Tuesday. The withdrawn bills would later be re-issued, presumably in a different format.
Modi’s plan finds echoes elsewhere. In the U.S., there are calls for pulling the $100 bill, which is a favorite denomination of drug traffickers. The European Central Bank reportedly is thinking about pulling the 500 euro note from circulation. In 2000, Canada axed its $1,000 bills and Singapore ended its $10,000 bills.
The new Indian policy follows the government’s tax amnesty, which attracted nearly $10 billion as Indians declared previously cloaked assets and income.
A report by Washington-based think-tank Global Financial Integrity said India lost $344 billion in illegal fund outflows from 2002 to 2011.