Summary of India Gambles with Its Currency

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The world is waiting to see whether India’s surprise move in late 2016 to “demonetize” its economy will unleash the country’s latent output, productivity and prosperity. Journalist Pramit Pal Chaudhuri provides a succinct analysis of the experiment’s ripple effects on India’s huge informal sector and how they might boost Prime Minister Narendra Modi’s chances of a second term. getAbstract suggests this information-packed report to financial policy makers, business executives and investors watching the Indian economy.

About the Author

Pramit Pal Chaudhuri is the foreign editor of the Hindustan Times, an Indian newspaper.

 

Summary

On November 8, 2016, India’s government revealed that by year-end it would take out of circulation all 1,000- and 500-rupee [about $15.60 and $7.80, respectively] notes, the highest denominated banknotes in India and 86% of its circulating cash. Prime Minister Narendra Modi’s aim is to rid the country of “black money” – the “untaxed, unaccounted funds” underpinning India’s “low-wage, low-productivity” informal sector, which makes up 45% of GDP, according to estimates. The government did not publicize this “demonetization” before the announcement to ensure that those holding the notes would be unable to launder the funds. Yet...


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