Activist Post – by Clint Siegner
Indian Prime Minister Narendra Modi launched a surprise attack on cash in late 2016. He gave Indians a few days to convert the two largest denomination bills then circulating to bank deposits, after which point any undeposited notes would become worthless. The move was intensely controversial. Transactions completed using cash represented the vast majority of economic activity in the country.
In order to sell the program Modi employed a familiar strategy. He vilified the users of cash as tax cheats and criminals. He promised the measure would punish black marketeers, boost the Indian economy, and increase tax revenues. The latter may be true – forcing transactions onto the grid is good for nosy bureaucrats trying to impose taxes and controls.
But it now appears Modi’s claims about the amount of criminal activity tied to cash and promises of economic growth were nonsense.
The official argument was that cash is an indispensable tool for black marketeers. The reform would catch many of these “criminals” with piles of cash they would be unwilling to declare and deposit. That argument fell apart last week when the Indian central bank reported that 99% of the outlawed bills were converted to deposits. Turns out very few “criminals” were punished.
Meanwhile the Indian economy is paying the price. Growth has slowed significantly and some estimate as many as 5 million jobs have been destroyed by the demonetization of cash. More and more Indians are angry.
They didn’t enjoy the upside promised by Modi. Instead, they suffered massive economic disruption and loss of privacy. Perhaps India’s experience will provide an object lesson elsewhere in the world where bankers and the political elite are waging a similar war on cash.
Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.
I wouldn’t say it backfired.
Since the whole scheme was designed to impoverish the people of India, I’d say it worked pretty good.
Actually the vast portion of the country was already impoverished. This was meant to enrich the few and establish the elite core who are actually the corrupt ones.
“Meanwhile the Indian economy is paying the price. Growth has slowed significantly and some estimate as many as 5 million jobs have been destroyed by the demonetization of cash. More and more Indians are angry.”
Too bad they don’t have hurricanes in India, no better way to improve an economy! Maybe they should look into geo-engineered tornados!
Lol
No it didn’t backfire. It worked because now more of the Indians will be coming here on H1B Visas.