Friday
January 6
2017

After Day 50: The Results From India’s Demonetization Campaign Are In

On the same day that Donald Trump was elected president of the United States, India also received an unexpected, earth-shattering announcement. However, theirs wasn’t of a disruptive, unconventional presidential candidate coming to power but of a disruptive new policy that would instantly shake up the lives of 1.25 billion people, rich and poor alike. At 10 p.m. on November 8th, India’s Prime Minister Narendra Modi announced that on the stroke of midnight all 500 and 1,000 rupee notes — 86% of the currency in circulation — would cease to become legal tender.

Modi’s demonetization maneuver was a “shock doctrine” tactic to dismantle the cash-centric black market, to cleanse the country of counterfeit notes, to further digitize the economy, and to get more of the population onto the formal, taxable economic grid.

Modi’s plan called for the canceled notes to be replaced by new 500 and 2,000 denomination notes, but these were slow to be circulated, and India — the most cash-dependent country in the world — suddenly found itself without enough cash to run its economy.

Source: Forbes (link opens in a new window)

Categories
Financial Inclusion
Tags
financial inclusion, public policy