November 28, 2016


India Wants a Cashless Society. But There's a High Cost. : A sudden government change has created chaos--and long ATM lines. (Hasit Shah, 11/28/16, Slate)

On Nov. 8, Indian Prime Minister Narendra Modi, a right-wing nationalist who had made the fight against India's endemic corruption a key campaign issue on his way to victory in the 2014 general election, stunned 1.25 billion people by going on television and telling them their 500- and 1,000-rupee notes (approximately $7.50 and $15, respectively) would be valid for only another four hours. After that, they would have to be exchanged at banks for newly designed 500- and 2,000-rupee notes, with a grace period of just a few weeks. This in a country where nearly half of the population doesn't even have a bank account, and 90 percent of transactions are made in cash. There has been utter chaos ever since. Actually, chaos may be an understatement.

This government is trying to fight corruption and move towards a more digital economy. In India, people have stashed away huge amounts of money--income that has never been declared and is then laundered through extravagant weddings, construction work, luxury vehicles, jewelry. Nobody knows exactly how much "black money" there is, but it's safe to say that there's a lot. By forcing people, apparently without warning, to go to banks and change the old notes for new ones, the government is trying to account for a huge quantity of money and bring it rapidly into the system.

Many in India agree with the principle of demonetization, as it's become known, because corruption has been so detrimental to the country's progress and limits opportunities for honest people. 

Posted by at November 28, 2016 6:05 PM