Rs 500 and Rs 1,000 notes banned: How Modi kept his black money masterstroke a secret for 6 months

Prime Minister Narendra Modi's gamechanging move to demonetise Rs 500 and Rs 1,000 notes was a well-kept secret for nearly 6 months. According to an ET Now report, work on the big-bang black money reform started six months back and the entire operation was kept top secret to avoid any leak of sensitive info.

It was around six months ago that the Modi government told the RBI to get set for this big-bang attack on black money. Earlier this year, Modi had made the decision to phase out the current lot of Rs 500 and Rs 1,000 notes.

Replacing 23 billion currency notes was going to be a gargantuan task. On top of it all, the move had to be kept a top secret.

Modi ensured his Cabinet too was not aware of the move. In fact, his team was informed of the plan shortly before Tuesday's address.

Modi's intentions were plain. He sought to stop the transaction of black money with the aim of giving the economy a veritable leg-up. He knew if the move was a success, people would be compelled to use only legitimate transaction networks, which would automatically make the government's tax kitty bigger.

According the report, officials involved in the demonetisation plan were quaratined and the notification on the move was printed in secrecy in the same press where the Union Budget papers were printed. Modi's Cabinet members were not even allowed to leave the room on Tuesday till the prime minister ended the address.

Given the context of the crucial upcoming assembly elections in Uttar Pradesh, the move is aimed at giving BJP a “strong talking point” about “a decisive government”. Further, the ban on high-denomination notes is likely to have an impact on election expenditure in UP.

The broader political purpose, insiders privy to the move told ET, was also to deflate the Opposition’s barbs on BJP’s anti-black money promises.

ET spoke to senior members of the ruling political establishment. They spoke on the condition they not be identified. Those familiar with the government’s thinking said although the withdrawal of current highdenomination notes as legal tender will cause “some disruption among common people”, BJP’s assessment is that soon there will be appreciation for a “genuine move” to attack the black economy.

Coming ahead of assembly elections in UP, the move is also likely to provide another campaign pitch for BJP.

BJP leaders told ET that the "decisive call" on black money will complement the Modi government’s decision to conduct surgical strikes across the Line of Control after Pakistan-sponsored attacks on the Uri army base.