India and the rupee

Modi in November 2016 announced on live television that all 500 and 1000-rupee notes, equivalent to about £6 and £12, would be banned in four hours’ time. People were given several weeks to exchange their demonetised currency for new notes at banks. But new notes could not be printed fast enough, and the policy sparked a months-long currency crunch that left tens of millions of Indians cashless or standing in line for hours each day to retrieve small sums of cash.

99.3% of the currency that India declared void as returned to the country’s banks in subsequent weeks, according to a Reserve Bank of India (RBI) report, indicating either there was less “black money” than expected, or that schemes to launder money were more successful than thought. The figures suggest prime minister Narendra Modi’s demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5m jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy — a key rationale for the move.

“Indian economy lost 1.5% of GDP in terms of growth,” he tweeted. “That alone was a loss of Rs 2.25 lakh crore [2.25tn] a year. Over 100 lives were lost. 15 crore [150m] daily wage earners lost their livelihood for several weeks. Thousands of SME units were shut down. Lakhs [hundreds of thousands] of jobs were destroyed.” Palaniappan Chidambaram, a finance minister under the previous Congress-led government, said.

Gurchuran Das, an economist and author, said  “The cost to the people was high, and we lost about a year of economic growth by my estimates. And to solve the jobs problem of India you need to grow at about 8% for about 20 years.”

https://www.theguardian.com/world/2018/aug/30/india-demonetisation-drive-fails-uncover-black-money