National Affairs

Modi’s “Note Bandi”: India Completes 4 Years On Sunday

On November 8, 2016, at 8 pm, Prime Minister Narendra Modi gave a surprise address to the nation, saying he wants to “make a special request” to Indian citizens. As of midnight on that day, Modi said, all Rs 500 and Rs 1,000 notes would no longer be valid currency. Instead, Indians would get fifty days to deposit the demonetised currency into their accounts, with the expectation being that those holding onto untaxed “black money” will be caught. Rs 500 and Rs 1,000 notes made up 86% of all cash in circulation at the time, so their withdrawal from the system meant a mammoth operation, affecting nearly everyone in India and beyond. The government and the Reserve Bank of India spent the months after Modi’s announcement constantly altering the rules to address unforeseen situations. Markets around the country struggled to grapple with a limited amount of cash in the system. Economists and analysts attempted to understand why Modi would take such a decision, and what its impact on the ground was. The government sold the idea that this was a classic Modi move: decisive, expansive, unexpected and built on his election-time image of taking on the corrupt. The Opposition accused Modi of being draconian, unprepared and with the aim of enriching the BJP at the cost of other parties. Reporting revealed a major disruption in the lives of ordinary people with the lack of cash making every transaction much harder for people. Whether it was wage workers losing a day’s worth of earnings to stand in line or low income patients unable to pay hospitals and even entire villages with no access to cash the impact was wide-ranging. It affected individuals as well as industries. But all of that economic distress nevertheless came with lots of support for the move. The government introduced a nation-wide Goods and Services Tax eight months after demonetisation, with the botched implementation of that policy affecting the economy even further. As of December 2018, it had become clear that both the note ban and GST had affected small businesses to such an extent that, though it was claiming the economy was doing fine.

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