Demonetization and its Discontents Arjun Jayadev

You know it is trouble when the metaphor that is said to get describe your policy is backwards from the very get-go.  The demonetization decree was hailed at the outset by a breathless and chest-thumping media to be a “surgical strike’’ against black money.  But a ‘surgical strike’ is at least in theory precise and targeted- in this case presumably aimed at the ‘black’ part of ‘black money’. What has transpired instead is more akin to a carpet bombing- the very opposite sort of campaign- a widespread and indiscriminate operation without concern for collateral damage. The demonetization decree outlawed ‘money’…

Interview with TM Thomas Isaac on Demonetisation

In an interview to Scroll.in, economics professor turned Finance Minister of Kerala, TM Thomas Isaac said that the secrecy surrounding the demonetisation was a blow to cooperative federalism, where the state and centre work collectively, and the move would not have a serious impact on tax evaders. In his surprise address to the nation on November 8, Prime Minister Narendra Modi pegged the demonetisation of Rs 1,000 and Rs 500 notes as a game-changer in the Centre’s attempts to target the black money economy. However, in the days since 86% of India’s currency in circulation was invalidated, many Opposition-ruled states and…

Demonetization: Illusory Gains, Enduring Damages Arindam Banerjee

The demonetization of Old High-value Denominations (OHD) announced on the 8th of November, with effect from midnight is surely the ‘Great Event’ of the times. The 1000/500 notes constituted 86 percent of the 17.8 trillion cash economy in the country has been sucked out overnight. Earlier instances of currency demonetization in India in 1946 and 1978 had been of high denominations, which were not used for transaction by common people. Similar steps in other countries have always been driven by special circumstances, hyperinflation in Zimbabwe or abolition of colonial currency after independence as in Singapore or Fiji (Currency Demonetization has…

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…