Modi's Experiment: Month Three
India's experiment in taking cash out of the economy is having the bad effects that some, or perhaps many, predicted. The supposed anti-corruption measure is hurting the poor badly. Much of the damage appears to stem from the failure of the government to prepare by printing enough of the new currency. Geeta Anand and Hari Kumar report in the NYT:
NEW DELHI — First, Yashpal Singh Rathore’s marriage was delayed by his future in-laws, who, like most Indians, ran short of cash after Prime Minister Narendra Modi banned the country’s largest currency notes in November.
Then the 29-year-old lost his job when the ensuing cash crunch hit demand for motorcycles and scooters sold by the company where he worked, Hero MotoCorp Ltd. After that, the prospective in-laws refused to let the wedding go forward until he found another job.
“So I lost my job and I lost my marriage,” he said in an interview at a protest, where he shouted slogans with more than 100 red-flag-waving workers let go by Hero.
Mr. Rathore is one among a large number of Indians — the precise number is not known — who have lost their jobs since Nov. 8, when Mr. Modi abruptly banned 86 percent of the country’s currency in a bid to eliminate “black money,” currency on which taxes had not been paid.
For the sake of secrecy, the government largely avoided printing replacement notes in advance. So there has been an acute and protracted shortage of cash as the government struggles to catch up. That, in turn, has proved economically damaging.
Nothing fails like incompetence.
UPDATE: Arun Gupta has a much more comprehensive look at demonetization in India here.