Only a meagre 0.7% of India’s currency was missing from the books following the devastating November 2016 demonetisation scheme, notes the Reserve Bank of India’s (RBI) annual report. Indeed, beyond expectations, 99.3% of worthless Rs 500 and Rs 1,000 were diligently returned to banks and deposited into accounts in the weeks following the currency ban.
If President Narendra Modi’s real goal in pursuing such a drastic monetary policy was to corner money launderers, the RBI is now wondering whether there was that much “black money” circulating in the country to begin with. Two years later, the negative repercussions of Modi’s demonetisation are still felt today and part of ordinary Indians’ daily struggles. The damage speaks for itself: 1.5 million jobs were lost, 100 people died and the country’s economy receded by 1.5 percentage points.
And although digital payments have gained some ground –demonetisation’s other objective – cash usage has skyrocketed: the value of banknotes in circulation grew by 37.7% in the past year. “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” states economist Gurchuran Das, speaking for The Guardian.
India is one of the world’s most avid cash users and although fighting tax evasion and money laundering are noble causes, does that justify putting an entire nation on its knees and the livelihoods of millions of citizens in jeopardy? The Indian case most certainly proves that political decisions must be supported by facts and that the desire to tighten the grip on criminals requires greater thought than simply banning a nation’s most popular denominations.