‘Demonetisation was a massive, draconian, monetary shock’, says Arvind Subramanian in his new book9 min read 29 Nov 2018, 07:59 PM IST
Imposing large costs on a wide cross-section of people could actually have been indispensable to achieve political success, says former chief economic adviser Arvind Subramanian of demonetisation in his new book 'Of Counsel: The Challenges of the Modi-Jaitley economy'
On 8 November, in a dramatic nationally televised speech that I watched in my room in North Block, the prime minister announced that the top two high-denomination currency notes of ₹ 500 and ₹ 1,000 would cease to be legal tender; that is, they would no longer be accepted as a government-certified means of payment. It was an unprecedented move that no country in recent history had made in normal times. The typical pattern had either been gradual demonetisations in normal times (such as the European Central Bank phasing out the €500 note in 2016) or sudden demonetisations in extreme circumstances of war, hyperinflation, currency crises or political turmoil (Venezuela in 2016).
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