Image from Flickr by SS & SS. From public domain.
India's Prime Minister Narendra Modi, who rose to power in 2014 with a promise he would ‘battle against black money’, has made good of his word — or so it seemed on the surface. On November 8, India withdrew 500 (US $7.50) and 1,000 (US $15.00) Indian rupee banknotes from circulation to stop the flow of black money and wipe out counterfeit currency from the system.
When we dig deeper into the consequences of this move, however, we find upsetting stories. People have been forced to stand in huge serpentine queues outside banks in India's metropolitan areas and villages in a bid to exchange their money, and numerous people have supposedly died while waiting in line or when health services refused to accept the old notes.
The lack of systematic implementation has created a wider network of chaos, especially in a country that is extremely cash reliant.
Implementation of #demonetization has been poor. While the buck stops with PM, real blame for execution lies with the usual suspects in MoF
— Minhaz Merchant (@MinhazMerchant) November 27, 2016
Modi's strategy is a part of various other steps he's undertaken to curb the black money menace in India, including the impending Goods and Services (GST) tax roll-out next year and a tax window and new amnesty schemes for tax evaders.
If demonetisation was meant to punish black money hoarders as per PM, why another amnesty scheme? Wasn't last scheme the absolute final one?
— Sitaram Yechury (@SitaramYechury) November 29, 2016
Let's try to dissect the politics and problems and understand the positives and negatives of the black money issue and India's demonetization drive that has left many poor Indians in a lurch with no access to medicines and daily essentials.
Demonetization: Good intentions, faulty implementation
Nearly 86 percent of India's cash reserve was in the form of recently banned denominations — Rs 500 ($7.5) and Rs 1000 ($15) notes. This left the Indian economy hurting for cash as traders, workers, and lower strata of society heavily relies on cash transactions. The number of unbanked in India is at a staggering 233 million (around 20% of the population), according to a 2015 PeW research report. So, even if India's right-wing government wanted to clear the system of black money and get India to go cashless, analysts claim there was lack of pre-planning that created problems for citizens.
For example, Indians stood in huge queues to withdraw their money, but the Automated Teller Machines (ATM) lacked calibration in the early days of demonetization to dispense the latest currency notes because of differences in the dimensions of old and new currencies.
Found an ATM with cash and absolutely no crowd. The ATM has only 2000 notes hence no one wants <img src="https://s.w.org/images/core/emoji/72x72/1f602.png" alt="