India's new strike against black money backfires

A week after India's sudden declaration that 500 and 1,000 rupee notes were no longer legal tender, the economy is in chaos. Modi had said earlier that if we bring back all the Black Money looted from India, we can deposit 15 to 20 Lakhs in every Indians account. After all its money looted from our hard working farmers.

India's Urge

What’s changed in a week…? Well for one, it's become clear that the government was simply too hussar  in its planning. Now about 86% of India's currency is no longer valid, the Central Bank has scuffle to print replacement denominations and the new notes are the wrong size for existing ATM's. PM Modi asked people to be patient for 50 days, but the process could take as long as four months. You have to wonder thet if PM Modi truly seek expert advice or reckon once again on a small and trusted set of politicians to determine policy. India's simply too big and complex for shock and amazement. Large parts of the rural economy use cash for 80% of transactions and have been hard-hit. The Farmers halfway in the country through the sowing season have run out of cash to buy seeds. Few villagers have access to an ATM. Most have to trog to a bank branch to change their cash, which means losing out on crucial days of labor.

Among the India’s middle class, PM Modi's 'Surgical strike on black money' still appears to be popular. Enough Indians are suffering that they believe it must be in a greater cause. And It’s one of the moral project, not an economic one. Stand in line, we’re told, and you honor our brave soldiers at the border. Economists agrees is will have no effect on the generation of black money through corruption. Meanwhile estimates of the amount of black money that will eventually be recovered vary widely. The optimists think that enough cash will be destroyed by hoarders that the central bank will be able to pay a burly dividend to the government. Others point out that a very small fraction of black money tends to be held as cash and that there are a dozen ways still available to launder that snippet. Worse, rumors of the demonetization were reportedly circulating before PM Modi's announcement, leading to inkling that the well-connected may have had time to dump their cash piles.