Currency changes akin to India’s bold move to mop up black money

In November 2016, India’s Prime Minister Narendra Modi announced the withdrawal 1,000 and 500 rupee notes, exposing 1.3 billion people to months of agony and financial difficulties.

Indians, according to a January 4, 2017 CNN report, endured an acute cash shortage and massive lines at banks as they sought to exchange worthless notes for new currency. Change was nearly impossible to find. Some businesses resorted to barter.  

The new notes issued by the government were smaller than the ones they replaced and the more than 200,000 ATMs had to be remodelled to dispense the new notes.

The decision, aimed at cracking down on corruption, essentially targeted those who had been holding illegal cash. It was followed by bank closures and disabling of ATMs.  

“Black money and corruption are the biggest obstacles in eradicating poverty,” Modi said.

The move was described as a “surgical strike” on tax evaders in a country that is basically a cash-based economy. Economists estimated that the banned notes represented 85 per cent of cash in circulation in India.

India’s Finance Minister Arun Jaitley, at the time, assured the world that honest people would not be affected by the ban.

Following the withdrawal, the government introduced 2,000 and 500 Rupee denomination notes over a three-week period.