The Indian Government has taken the controversial step of demonetarizing all 500 rupee ($7.30) and 1,000 rupee ($14.60) notes in an effort to curb “black money” and the corruption that generates in an insidious and clandestine economy.

The excellent post for the FCPA Blog by assistant professor Suvrajyoti Gupta draws attention to the potential pitfalls of this move, which has left many Indians unprepared.

He has highlighted the potential for the existing government to gain a fiscal advantage from the pronouncement, in that it may impede the smaller political parties who rely upon cash donations to fight their election campaigns.

While I concur that the effects upon poorer people who have no ID documents or bank accounts could be far reaching, there seems to have been a significant lead-up to various measures of controlling black money in India.

For example, the ruling party was voted in on an anti-corruption plank, which resulted in the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015.

Similarly the Direct Tax Dispute Resolution Scheme 2016, Kar Vivad Samadhan Scheme, the Benami Transaction Prohibition Act are a part of the complex web of mechanisms to curb black money in India. Demonetization is not a silver bullet, rather a necessary step in the process of cleansing.

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Dealing with the issue of black money first, the Indian government has already shown a determination to deal with corruption and fraud. It has enacted a new Insolvency and Bankruptcy Code (2016), with a view to prevent contrived bankruptcies designed to defraud creditors of their investments. The new Code promises to greatly expedite the insolvency process in keeping with the time scales of the major business nations.

This said, Mr. Gupta may well have hit upon an inadvertent effect of the demonetization process, although I for one do not believe the move to be politically motivated.

I consider the act of drafting the new Bankruptcy Code as being evidence of a change in approach by India to historical pitfalls and failures that undermined some western financiers’ confidence in doing business with one of the largest and fastest growing economies in the world. I see the demonetization process in the same light: a move towards extinguishing the black economy that perpetuates the ability of the corrupt to continue with their illicit transactions.

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As I perceive the demonetization decision, it has been made with the best of intentions, albeit I concur with Mr. Gupta that collateral damage is inevitable. Also, one has to wait and watch whether it has actually served its primary purpose – elimination of black money (as significantly large chunks of such black money are converted to real estate or are lying in international bank accounts).

But, one has to ask, what would have been the alternative to this decision? Mr. Gupta suggests that perhaps it could have been delayed pending additional consideration. My observation would be: who is to say how much consideration has already been invested in deciding on this route? Plus how long would the additional determinations have taken?

It is this inertia that has plagued Indian politics for too many years. The fact that decisions are being made (and more importantly being put into action) should not generate criticism, as long as those decisions are made for all the right reasons.

The unfortunate fact is that it is always the “common man” who suffers the most when a nation is stricken by corruption. Similarly the same “common man” is most vulnerable when governments seek to combat such corruption. How do you deal as a leadership with what is effectively a “lose-lose” situation as far as the humblest citizens are concerned?

We should also draw attention to the fact that that the Indian government is not simply pulling the rug from beneath those currently holding the high-value rupee notes. Instead, the government is allowing those holding the notes to exchange them in the banks until December 30, 2016, on proof of identity. Unfortunately, it may also be that this requirement for identification documents that is going to prove the biggest hurdle to the more underprivileged (those who don’t currently hold the necessary ID papers).

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The issue of high-value bank notes is not unique to India. For example, European governments and law enforcement agencies have had a torrid time with combating money laundering due to the €500 note ($533 or 36,431 rupee).

A small wedge of these Euro notes can be worth a lot of money. A suitcase of them can be a significant sum.

The ability to transport large sums of cash across Europe due to these high denomination notes has been so problematic that the European Central Bank decided earlier this year that it would stop printing them, with a view to their being phased out by 2018.

The similarities are there to be seen. Did the European decision in May act as a catalyst for the Indian government?

Moving on, we can turn our attention to the potential for political advantage inherent in the decision: was it a deliberate ploy, factored into the process? Was it a calculated and clandestine resolution aimed at impeding the political opposition? If one considers the decision in tandem with the implementation of the new Insolvency and Bankruptcy Code, plus the government’s desire to improve business confidence in those willing to invest in India, then surely the government’s decision to demonetize high-value rupee notes adds credibility to its stated intentions.

The Indian government may simply be acting upon its electoral promises to combat corruption. I accept that some are frustrated with the perceived lack of activity in terms of repatriating black money and the profits of corruption which have fled the Indian jurisdiction. But I know that the Indian government is looking at ways in which to achieve this goal, including the use of experts in international fraud and asset recovery.

It may be that this demonetization process came as leftfield shock to some. As outsiders looking in, it certainly took my colleagues and I by surprise. But time will judge whether or not the decision was effective or not. The decision has been made: it seems sensible to stand back and see how it plays out.