Two weeks ago, India’s Prime Minister Narendra Modi, who was elected on a platform of market reforms, out of the blue launched a scheme called demonetization that declared 85 percent of India’s currency null and void. Within hours of his announcement, India’s highest currency bills Rs. 500 ($7.50) and Rs. 1,000 ($15) ceased to be legal tender. He announced that they would be replaced by new Rs. 500 and Rs. 2,000 bills that people could swap at designated banks with proof of ID.
The ostensible purpose of the move is to flush out untaxed “black money” and modernize India’s cash economy into an electronic one. But the actual result, writes Shikha Dalmia, will be further impoverishment of the poor, economic retrenchment, and, above all, an end to India’s liberalization.
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