38 years ago, in the year 1978, right after emergency was lifted from India, Janta Party government led by another politician from Gujarat Prime Minister Morarji Desai, had decided to demonitise Rs 1,000, Rs 5,000 and Rs 10,000 notes in a bid to combat corruption and black money. During that time too, people were as surprised by the decison as they are now with PM Narendra Modi’s move. Prime Minister Narendra Modi on Tuesday announced the scrapping of high denomination currency, with an aim to curb black money. Usually, high value notes are the basis of any form of corruption and illicit deals related to unaccounted money. According to a TOI report, the difference between that time and now is that in 1978, a Rs 1000 note could buy 5 sq ft of real estate space in south Bombay, but at this moment a Rs 500 note cannot even buy even a hundredth of a square foot in that area.
Anil Harish, a senior advocate told TOI, “At places like Crawford Market and Zaveri Bazar, peo ple were selling Rs 1,000 notes for as little as Rs 300.” He added that people did not want to deposit their high denomination notes in banks as they feared income tax problems. The notes had such huge monetary value, anyway, that common people did not won those like people do these days. On January 16, 1978, the government said that high value notes would cease to be legal tender at the close of banking hours on that day and that all banks and treasuries of governments would remain closed for transactions — the next day on January 17. The High Denomination Bank Notes (Demonetisation) Act, 1978, kicked in which barred the transfer and receipt of high denomination bank notes. That law made any contravention including false declaration by depositors and others punishable — with a fine or a three year prison term. At that time gold and commodity prices fell sharply. But the impact was limited, IE reported.
Harish added that people coming to deposit currency in banks had to fill up forms, and if seen with huge amounts, the banks informed the IT cells. If the people could not explain their source of income, the IT department would levy taxes as huge as 90 percent.