Demonetisation Decoded: A critique of India’s currency experiment

“Demonetisation Decoded: A critique of India’s currency experiment”, written by Jayati Ghosh, C.P. Chandrasekhar and Prabhat Patnaik and published by Routledge India, is an important book that provides a quick and concise explanation of the goals, implications, initial effects and the political economy of the major demonetisation move of the Indian government, that involved de-recognition of over 86 per cent of the value of Indian currency in circulation in one stroke.

Buckling under Pressure Jayati Ghosh

Is there no one left in our important institutions who is still capable of speaking truth to power? The last year has seen a depressing – even frightening – erosion in the credibility of the major institutions that in different ways are vital for the functioning of our democracy. It is true that the Congress Party when in power has also not covered itself in glory in terms of respecting such institutions, except when forced to do so. But the current “low, dishonest” phase of history (in W.H. Auden’s apt phrase) that we are experiencing in India surely marks a…

The Demonetization Fiasco Prabhat Patnaik

The demonetization of 86 percent of the currency of the country, a virtually unprecedented  measure anywhere in the world, has brought immense hardship to the working people of the country, and will damage their living standards permanently (since the Modi government plans not to replace the entire value of the demonetized notes by printing new ones). Many however believed that it was a step being taken for the greater social good, for achieving certain important social goals. Three of these goals were mentioned by the government from time to time: to attack black money, to replace counterfeit notes, and to…

Barbara Harriss-White on Demonetisation An interview with Madras Courier

Part 1 Barbara Harriss-White is an Emeritus Professor at the University of Oxford, with decades of experience studying India’s vast informal economy. It was this economy that was most hit by the move to demonetize higher denominations of currency taken on November 8. She answers a series of questions on the noteban with Madras Courier – painting a comprehensive picture of what demonetization has done to democracy, the 'black economy', corruption, agriculture, Introduction by Barbara I have been following notebandi from Europe (where the media are paying little attention) and I’m not watching Indian TV. So my experience isn’t first-hand, and my answers are…

The Utter Failure of Demonetization: The RBI says so even as it says not Surajit Mazumdar

From the figure of the value of fresh banknotes issued by banks by 19 December, it can be concluded that we are still very far away from the full replacement of the cash withdrawn from circulation and the severe cash shortage is going to continue well beyond 30 December. Utter_Failure (Download the full text in PDF format)

The Dialectics of Authoritarianism Prabhat Patnaik

We are seeing in India at present a remarkable inversion of reason. The more the common people suffer from the impact of Modi’s demonetization, the more he is lauded for the “courage” shown by him in undertaking it. An economic measure should be, and normally is, judged on the basis of how it benefits the people, and any measure that brings distress to the people is derided for that reason. What we find in the present case however is just the opposite: the more demonetization brings distress to the people, the more it is applauded for its wisdom and courage.…

Banks as victims C. P. Chandrasekhar

In the outcry against the disastrous demonetisation experiment of the Modi government one aspect that has not been given adequate attention is the damage it has done to the reputation and the balance sheets of the banks. Customers queueing before bank doors and ATMs seem on occasion more forgiving of the government than of the harassed bank employees, who are forced to ration out currency and offer those customers they can accommodate, less than even the maximum withdrawal permitted by the government and the RBI. When new notes are discovered in inexplicable sums in the hands of rogue operators, it…

Money and the Social Contract in India Jayati Ghosh

The social contract between a state and its citizens is a complex thing. Philosophers of the European “Enlightenment” saw it as the basis on which society is organised so as to ensure the mutual protection and welfare of its members. It is therefore the implicit social arrangement whereby citizens give up some of their rights and freedoms to the state or a similar authority, in return for some degree of order and stability that would effectively ensure the protection of their remaining rights and freedoms. In very unequal societies, the voluntary nature of such a social contract is not particularly…

Demonetisation and Banks’ Lending Rates Prabhat Patnaik

Spokesmen of the ruling party are busy these days spreading another falsehood, namely that, because of demonetisation which has brought in huge amounts of cash to their coffers, banks would be so keen to lend that their lending rates are going to fall, and that such a fall will act as a stimulus for the economy. This is completely wrong, and banks’ lending rates can never fall for this reason. They may of course fall because the monetary policy announced by the Reserve Bank of India is so altered as to cause such a fall. But that could happen anyway;…

Demonetization as the Basis for a Fiscal Stimulus Prabhat Patnaik

A bizarre argument is doing the rounds these days. It states that the cash which gets disabled in the “black economy” because of the government’s demonetization measure, would enable the government to undertake an equivalent amount of expenditure with impunity; it can therefore spend more on infrastructure and other essential areas, or simply provide cash transfers to the people. BJP spokespersons who have been putting forward this argument, are promising transfers to everyone, in a manner reminiscent of Modi before the Lok Sabha elections, when he had promised that “black money” from Swiss Banks would be brought into the country…