The Abysmal State of Economic Decision Making Prabhat Patnaik

The minutes of the Board meeting of the Reserve Bank of India just prior to the announcement that currency notes of Rs.500 and Rs.1000 denomination were being demonetized are now available in the public domain, thanks to an RTI query. And what they reveal is the abysmal state of decision-making on economic policy that prevails under the Modi government. To be sure, economic decision-making has always been informed by class bias; but that is not what I am referring to here. Even when a decision is taken on the basis of the interests of the ruling classes, the argument for…

The Golden “Diwali Gift” Jayati Ghosh

The Modi government made its supposed determination to end corruption in India its signature theme. The massive damage done by demonetisation as well as the continuing chaos produced by the flawed introduction of the Goods and Services Tax have all been justified on the grounds of reducing possibilities of corruption and tax avoidance. Similarly, the imposition of Aadhaar requirements on the population for access to all manner of publicly provided goods and services is regularly justified on the grounds of reducing “leakages” and misappropriation of benefits. The Prime Minister has sought to burnish his image of anti-corruption crusader through emotional…

The de-digitisation of India Jayati Ghosh

So it’s official: cash use is back in almost full force in the Indian economy. Cash withdrawals from ATM machines – a reasonable if incomplete proxy for the use of cash in the economy – are nearly back to the level of just before the demonetisation shock of 8 November 2016. RBI data on use of debit and credit cards to withdraw money from ATMs show that such withdrawals, which had collapsed to only Rs 850 billion in December 2016 largely because of the sheer unavailability of cash with such machines, amounted to Rs 2.27 trillion in July 2017, only…

The Truth About Demonetization Prabhat Patnaik

After months of dilly-dallying the Reserve Bank of India has finally come out with the figure that nearly 99 percent of the currency notes demonetized in November 2016, came back to the banking system. The total value of demonetized currency, in the form of Rs.500 and Rs.1000 notes, was Rs. 15.44 lakh crores, of which Rs.15.28 lakh crores came back to the banking system, which is 98.96 percent. Since a few small windows are still open for the return of demonetized currency, the final figure will certainly exceed 99 percent, which puts paid to the government’s claim that demonetization would…

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)

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…