> That could have been done gradually without banning notes.
Please correct me if I'm wrong, but banning notes is to bring about a few changes like forcing people to declare black money and fighting the counterfeiting industry (just to name a few). Like you pointed out, the cash transaction limit could have been brought into force without banning the notes, but by combining both, isn't the cap more effective in deterring accumulation of black money in the future?
> Introducing higher denomination make even more less sense.
I don't quite understand this. Higher denomination or not, the cap is on the transaction amount, so how are they related?
For a good argument in favor of the move, and for a theoretical perspective on this, even in a developed economy with less paper money %, please see Kenneth Rogoff's blog post and also his book - the "Curse of Cash" (I've not read his book though only his posts and tweets on this)
Thanks. So if I'm not wrong, what you're saying is even with demonetization and a transaction cap, they will barely make a dent in the state of black money in India. Am I correct?
Remove "and a transaction cap" part, you are correct.
Going cashless will solve terrorism and counterfiet problem. World is going cashless and naturally India would have gone too without the huge cost of banning notes.
However I have different issue with this, allow me to quote
Corruption and black money are a consequence of big government, of one set of individuals having discretionary powers over the actions of others. If Modi was serious about tackling black money, he'd bring about institutional changes that would take us towards the minimum government he had promised in his 2014 campaign. Instead, government keeps getting bigger, controlling more and more of our lives. More government = more corruption.
Also Center/Modi wants to make prosecuting corrupt public officials more difficult and bribe-giving a criminal offence. Considering giving bribe is unavoidable fact-of-life and cost of doing business in India, Center wants to make CEOs responsible [1] [2].
> The size of the government is not the deciding factor.
For India it is. Its that simple.
What do you suggest Indian Government should do to reduce corruption while still holding same power if not increase it ? Laws & executions have failed consistently. It wont be different this time.
Corruption is a social problem with huge momentum. It took a while for it to creep in and it will take a while to creep out (like all social problems).
Reducing unneccessry regulations and red tapes are only quick fixs we have.
Thanks, I've been hearing rumors about this too [1]. Would be a welcome step if and when the govt. implements it.
[1]: http://economictimes.indiatimes.com/news/economy/policy/demo...