Possible ways to reduce corruption and reduce black money

India’s battle against corruption has long been linked to the country’s high cash usage, with black money, bribery, and tax evasion thriving in an opaque cash-driven economy. A few recent incidents involving high level corruption has shaken the confidence of the citizens and unless some strong measures are taken, it will have negative impact on the morale of the citizen, confidence of the business community as also the global investors. Adopting a central bank digital currency (CBDC) and reducing the highest denomination to ₹100 can be potential game-changers. Digital transactions leave a trail, making illicit dealings harder, while lower denomination notes make hoarding cash and bribing large amounts impractical. The adoption of digital currency could bring enhanced transparency, as every transaction is recorded, making tax evasion and large cash-based bribes more difficult. Additionally, a ₹100 maximum note would make cash transactions cumbersome, discouraging bulk bribery and the storage of illicit wealth. However, challenges remain. While digital currency could improve financial oversight, concerns over cybersecurity, financial privacy, and the digital divide must be addressed, as millions still rely on cash for daily transactions. Similarly, eliminating high-value notes may push corruption towards alternative assets like gold, cryptocurrencies, and foreign currencies rather than eradicating it. Lessons from India’s 2016 demonetization suggest that while such measures can temporarily disrupt corruption, they do not fundamentally eliminate it. For lasting impact, these monetary changes must be paired with broader institutional reforms, including stronger anti-corruption laws, judicial efficiency, financial literacy, and governance transparency. The real fight against corruption lies in reducing bureaucratic red tape, strengthening enforcement agencies, and encouraging digital transactions in a way that is inclusive, secure, and efficient. While digital currency and a Rs.100 note cap could curb cash-based corruption, systemic reforms and stringent enforcement remain crucial to reducing corruption.

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