It has been nearly two years since the Indian Prime Minister Narendra Modi announced in November 2016 that his government would repudiate old 500 rupees and 1000-rupee notes and replace these with newly issued 500 rupees and 2000-rupee notes. The government advised that anyone holding the old notes can exchange these for new notes at any bank (up to a maximum limit per day) or deposit unlimited amounts as credit into a bank account.
The Indian demonetization experiment has been promoted as a way to crack down on black money circulating in the economy, with the rationale being that those evading taxes by holding funds in cash or criminals keeping ill-gotten gains in cash would be forced to make such money visible to the government due to the need to deposit old notes into a bank account. This global ‘War on Cash’ is an attempt by governments to raise revenue from the cash transactions that occur in an economy, but the price of doing away with cash, especially in a developing country like India where many do not even have bank accounts, is likely to be high. By many accounts, the demonetisation experiment has been extremely troubling, with reports of mass financial dislocation and harm to some of the poorest individuals in India. |
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