The economy has taken a beating, huge financial losses have been incurred, and the marginalized poor, least able to withstand adversity, have been negatively affected. India’s black money problem has not gone away. Two years later, the dust has settled, and it has become obvious that demonetization was not the resounding success the government expected it to be. Queues at banks grew many people suffered, especially the poor, who had no access to credit cards or mobile wallets and dozens of deaths resulting from the crisis were reported. There was a rush at banks and ATMs to exchange old notes and withdraw new currency.
The immediate fallout was chaos, as the country scrambled to cope.
In a country with a huge informal economy, dependent on cash transactions, demonetization was a big political gamble, too.īy Roger L. In addition, the government claimed the plan would strike a major blow against corruption and counterfeiting and would kick-start India’s transition into a digital, cashless world. By making the notes worthless almost overnight, the government hoped to destroy large piles of black money hidden away by tax evaders. The withdrawn notes, amounting to US$320 billion at the time, represented 86 percent of the total currency value in circulation in India.
There was no precedent, anywhere in the world, for a sudden economic shock of this scale. The plan, termed demonetization by the press, was planned in secrecy and announced dramatically, as Modi’s masterstroke against black money.Īs economic experiments go, it was a big, bold move. In a live telecast to the nation, Prime Minister Narendra Modi declared that the country’s two highest-denomination currency notes (Rs 1,000 and Rs 500) would be withdrawn immediately from the market. 8, 2016, there was a surprise announcement on Indian television.
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