This time around, let's have a peek at something that you won't have heard of, but is actually quite a large news story. And, if the title wasn't enough of a hint, it has something to do with cash.
Narenda Modi (this guy on the right) is the President of the 2nd most populous country in the world: India.
India has the 6/7th largest economy in the world and has one of the fastest growing.* (It's very hard to get precise figures).
The Problem
But his country's growth is held back by what's known as the 'Black economy', which represents businesses and services operating in illegal goods and services e.g. drugs, prostitution, armaments. Within this illegal trade, tax evasion and corruption are the main obstructions to Modi's dream of Indian expansion.
Tax evasion is what it seems: it's dodging tax payments. This means that the government can't get as much money as it needs from the people, especially from larger businesses. As a result, it can't invest money back into the country and public services. This is linked to corruption which, in this scenario, is government officials and public offices giving or receiving money in return for favours and support. A study conducted in 2005 showed that around 62% of Indian people had first-hand experience of this crime.
Modi's response
The president unleashed an ingenious plan: he would recall ALL 500 and 1000 Rupee - the Indian currency - notes. Generally, 500 R equals about £6 and 1000 R equals £11/12. This is about the equivalent of removing all 'fivers' and 'tenners' from everywhere in Britain. Pretty big, right? Imagine if suddenly, your whole wallet was worthless!
However, it's a little cleverer than it seems. As we've established, the 500/1000 notes are India's most used items of money(86% of all banknotes in use) and the only way to get new ones is by handing them in at your bank. And, because so much of the money in the black economy is fake or laundered, it cannot be simply 'turned in' as the criminals would then be arrested. Furthermore, any sums of money that are returned and are over £250,000 worth will be investigated to check if tax has been paid. Pretty smart, right?
Recap
The bad guys can't get any money, and no-one would accept payments if they tried to use any of their current funds - as they're worthless. This means that they have no funds or means of operating, leaving the country in a much stronger position than before. Yeah, sure, they'll find some way to create counterfeits, but in that time, Modi is free to launch anti-corruption campaigns, putting better people in charge of the police and public services; meaning that they'll do a more efficient job of clamping down on the Black Economy. As a result, the legitimate economy can expand and grow, supporting the Indian people! Yay!
Next time, we'll return to Britain and have a look at the new budget. It might be a bit more relevant than normal. And, check out Joel's film reviews blog: http://lennyfilmreviews.blogspot.co.uk/. He's currently looking at the Dark Knight Trilogy.
*In case you're not sure of what the 'economy' is, it's defined as:
Narenda Modi (this guy on the right) is the President of the 2nd most populous country in the world: India.India has the 6/7th largest economy in the world and has one of the fastest growing.* (It's very hard to get precise figures).
The Problem
But his country's growth is held back by what's known as the 'Black economy', which represents businesses and services operating in illegal goods and services e.g. drugs, prostitution, armaments. Within this illegal trade, tax evasion and corruption are the main obstructions to Modi's dream of Indian expansion.
Tax evasion is what it seems: it's dodging tax payments. This means that the government can't get as much money as it needs from the people, especially from larger businesses. As a result, it can't invest money back into the country and public services. This is linked to corruption which, in this scenario, is government officials and public offices giving or receiving money in return for favours and support. A study conducted in 2005 showed that around 62% of Indian people had first-hand experience of this crime.
The president unleashed an ingenious plan: he would recall ALL 500 and 1000 Rupee - the Indian currency - notes. Generally, 500 R equals about £6 and 1000 R equals £11/12. This is about the equivalent of removing all 'fivers' and 'tenners' from everywhere in Britain. Pretty big, right? Imagine if suddenly, your whole wallet was worthless!
However, it's a little cleverer than it seems. As we've established, the 500/1000 notes are India's most used items of money(86% of all banknotes in use) and the only way to get new ones is by handing them in at your bank. And, because so much of the money in the black economy is fake or laundered, it cannot be simply 'turned in' as the criminals would then be arrested. Furthermore, any sums of money that are returned and are over £250,000 worth will be investigated to check if tax has been paid. Pretty smart, right?
Recap
The bad guys can't get any money, and no-one would accept payments if they tried to use any of their current funds - as they're worthless. This means that they have no funds or means of operating, leaving the country in a much stronger position than before. Yeah, sure, they'll find some way to create counterfeits, but in that time, Modi is free to launch anti-corruption campaigns, putting better people in charge of the police and public services; meaning that they'll do a more efficient job of clamping down on the Black Economy. As a result, the legitimate economy can expand and grow, supporting the Indian people! Yay!
Next time, we'll return to Britain and have a look at the new budget. It might be a bit more relevant than normal. And, check out Joel's film reviews blog: http://lennyfilmreviews.blogspot.co.uk/. He's currently looking at the Dark Knight Trilogy.
*In case you're not sure of what the 'economy' is, it's defined as:
'The wealth and resources of a country or region, especially in terms of the production and consumption of goods and services'; it's basically the value of all the businesses and services in a country.
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