Modi’s Demonetisation Move May Have Permanently Damaged India’s Informal Sector Pronab Sen

At the stroke of the midnight hour on November 9, 2016, India lost 86% of its monetary base. The media – print, electronic and social – has been fulsome in its praise of Prime Minister Narendra Modi’s “master stroke”, by which he has reportedly destroyed the base of corruption in India. “Surgical strike”, “shock and awe”, “big bang reform” are only a few of the laudatory phrases that were used to describe the pre-emptive demonetisation of Rs 500 and Rs 1000 notes. There is no doubt whatsoever that Modi has pulled off a major political and publicity coup and has…

Artificially Created Distress Utsa Patnaik

Without adequate preparation or thought, the monetary authorities and the government have taken a drastic step declaring as worthless over 86 per cent by value of the currency notes in circulation with the public. A prior large increase of lower denomination notes should have been ensured through banks and ATMs, so that overall money supply did not reduce and a normal level of activity could be maintained. This was not done, so effectively a very severe monetary contraction has been imposed, the purchasing power of the population has been suddenly taken away, reducing the level of economic activity and causing…

Why the Corrupt Rich will Welcome Modi’s ‘Surgical Strike on Corruption’ Jayati Ghosh

Narendra Modi came to power in India on a promise to end corruption. Halfway into his tenure, little seems to have happened to achieve this goal. The most obvious steps – such as taking a strong line on the known illegal accounts held in Swiss banks and tax havens, or ending the ability to hold shares without revealing your identity, or making funding of political parties transparent – have simply not been taken. People were beginning to murmur that the government had not lived up to its grandiose promises. So last week Modi did some more of the smoke and…

The Political Economy of Demonetising High Value Notes Jayati Ghosh

The Modi government is extremely adept at optics, at policy measures presented in a blaze of publicity that dazzles the public, rather than with the required attention to detail that might ensure their success. The latest announcement of the demonetisation of high value bank notes is of the “shock and awe” variety of measures. While presented as evidence of the government’s supposedly firm resolve to root out black money, in reality it will barely touch the problem of generation of black money, even as it is being implemented in a way that causes immense economic harm to ordinary people and…

Demonetization of Currency Notes Prabhat Patnaik

Narendra Modi went on national television at 8 p.m. on November 8 to announce that from midnight of that very date, i.e. in a mere four hours’ time, 500 and 1000 rupee notes would cease to be legal-tender. The justification advanced for this bizarre move was that it would strike at “black money”. An additional argument was thrown in, to the effect that fake currency notes used by “terrorists” would now cease to be effective; and some particularly enthusiastic supporters of the government even went to the extent of calling it a “surgical strike against terrorism”. I shall come to…

The Hegemony of Finance C. P. Chandrasekhar

Three parallel developments that caught media attention over the last month point to the restoration of the hegemony of Finance Capital in the years since the 2008 crisis. They also reveal the likely consequences of the neoconservative backlash, led by Finance, against post-crisis financial sector reform in the US and other developed countries. One was the decision of the Financial Sector Protection Bureau (FSPB) of the US, an institution created after the 2008 crisis, to arrive at a settlement with Wells Fargo (WF) in an investigation relating to a rather shocking discovery. More than 5000 employees of the bank had,…