India Gambles with Its Currency

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...