The Narendra Modi government shook the country last week by announcing the demonetisation policy and turning notes of Rs 500 and Rs 1000 into paper. While people were allowed to exchange their old notes for valid currency, deposit the money, or withdraw a certain amount from the ATM, the move saw unprecedented lines outside banks and ATMs with bank employees working overtime to make up for the cash crunch in the common man’s life.
The move to make currency illegal overnight has, however, happened earlier, both times with a view to interrupt black money deals and tender black money hoarded as illegal. By putting a cap on the money that one is able to deposit without coming under the scanner of the Income Tax department, the government aims at investigating possible tax evasions as well.
Here’s a look at the two other times when high currency was demonetised in India.
1. January 1946: Notes of Rs 500, Rs 1000, Rs 10,000 demonetised
On January 11, 1946, the government announced that notes of Rs 500, Rs 1000 and Rs 10,000 will not be legal tender from January 12, 1946. The front page of Indian Express from that day reads that the move was made with an aim to curb black marketing. The repercussions were similar with people dying of shock, exceptionally long lines at the bank and the middle classes being hit.
The old notes were being sold at 60 and 70 per cent of their price. The move was called a ‘death blow’ to black marketeers. A rumour also went around that Rs 100 notes were being demonetised too, leading to panic and people discarding their Rs 100 notes as well.
2. January 1978: Notes of Rs 1000, Rs 5000, and Rs 10,000 demonetised
The Janata Dal demonetised high currency notes of Rs 1000, Rs 5000 and Rs 10,000 in a second such historic move, again with a view to curb black money transactions. It was termed as “an Act to provide in the public interest for the demonetisation of certain high denomination bank notes and for matters connected therewith or incidental thereto.”
People who possessed these notes were given till January 24 the same year — a week’s time — to exchange any high denomination bank notes. The one big difference with the announcement Tuesday is that Rs 1,000 and higher value notes were almost impossible to possess then for the common man given the value of these amounts then.
3. November 2016: Notes of Rs 500, Rs 1000 demonetised
In Parliament, the opposition parties are still at loggerheads with the centre, with most demanding a rollback of the move. However, the government has stated vehemently that they will not be taking back the move even as lines continue to grow outside banks.