The news that India’s 500- and 1,000-rupee ($7.50 and $15) bank notes
were suddenly withdrawn from circulation overnight on Nov. 8 hit the
nation like a bombshell. The decision by Prime Minister Narendra Modi
was shrouded in secrecy and resulted in 80 percent of the cash in
circulation evaporating in an instant.
Modi’s unprecedented action was directed at a cash market that the
New York Times said constitutes up to 35 percent of gross
domestic product and was used for both bribery and tax evasion. It was
also said to be a move against counterfeiting and the funding of
terrorist activities. The only exception to the edict was a 72-hour
delay to allow for payments of funeral expenses and airline tickets.
India is the seventh largest economy in the world, and unlike most
of its counterparts in size, its economy is dominated by cash. One
example cited in news reports by the Times and the BBC was the Old
Delhi Market, one of Asia’s largest, that functions entirely in cash.
Other stories told of people who had their entire life savings in
suddenly obsolete currency.
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People will be able to exchange notes valued at up to 4,000 rupees
(about $60) a day at banks between Nov. 10 and Dec. 30, but any
amounts larger than that will have to declared to the tax authorities.
The Bank of India website added that “anything over and above that
will be receivable by way of credit to bank account,” and redirected
the home page of its website to instructions on how to open one.
Among the immediate results of the announcement were brawls in the
streets outside banks, a doubling of the price for 10 ounces of gold,
and a rush to buy gold jewelry. Money launderers profited, as well,
charging 500 rupees to exchange 1,000-rupee notes for smaller, still
legal 100 rupees.
New 500- and 2,000-rupee notes were immediately issued as
replacements. They both maintain the portrait of Mahatma Gandhi, but
are otherwise entirely different.
The stone grey 500-rupee measures 66 by 150 millimeters in size. On
its back is Delhi’s Red Fort with an Indian flag flying on top. The
World Heritage site was the home of the Mughal emperors for 200 years.
The 2,000-rupee note is magenta in color and measures 66 by 166
millimeters. It has the Mangalayan spacecraft on the reverse,
depicting the Mars Orbiter Mission, India’s first venture into
Both new issues have the usual range of expected modern security
features, such as shifting ink, watermarks, windowed security threads,
and intaglio printing.