I’ve written here, and here about the ongoing disaster in India’s economy. This disaster has been brought on by the central government invalidating the 500 and 1000 Rupee banknotes (a process called “Demonetisation) which comprises the vast majority of cash in India – particularly for poorer Indians.
What was originally billed as a plan to stop corruption, has now morphed into a desire to shift to a cashless economy. Going cashless is dangerous, as it gives government far too much control over the financial decisions of individuals, and only enables far more massive government-led corruption (the worst kind of all).
This is a direct assault on the freedom, and financial opportunity of the vast majority of Indian citizens. Because of endemic poverty and massive corruption, the vast majority of people in India conduct business in the “informal economy.”
This is a logical choice by individuals, because conducting business informally can provide an escape from state-run incompetence and graft.
But instead of decentralizing power and reducing the control of corrupt officials, India’s Prime Minister Narendra Modi is only making things worse. By expanding the power of the central government and invalidating most of India’s cash, Modi is destroying local economies, crushing the only source of income poor Indian’s can rely upon.
It’s so bad that some are even calling it the 8/11 Attack On India’s Economy.
There is fast growing concern about the effect on the Indian economy. As reported in The Times Of India, the “Move to demonetize high value currency taken by PM Narendra Modi purportedly to tackle ‘black’ money has taken India’s economy back by 20 years. With the 50-day-deadline sought by PM to bear with inconveniences caused by the move having ended on December 30 and people still suffering, Congress will no longer wait or give PM additional time and will intensify its agitation against the union government across the nation henceforth. “
As I’ve said before, an economy functions only on a sense of trust and belief in the value of money. If that trust is lost, disaster will follow.
Big Banks Benefit From Demonetisation – Everyone Else Suffers
An overlooked aspect of the demonetisation disaster is really looking at who stands to benefit. Of course the politicians will benefit, as more money will be put into their hands. But the big banks will benefit as well, as the shift to digital transactions will allow them to extract fees they can’t get from cash transactions.
Once again, regular people suffer, while those with corrupt connections to government get rich.
While the banks might be happy with it, the truth is the demonetisation disaster in India is eroding trust in the government, and is literally destroying the value of money people once relied upon. Demonetisation is a foolish and desperate move from a government that would rather force social-engineering schemes upon the poor than tackle the real problems that need to be solved.
Leaders and governments should trust and empower their people, not use them as test subjects for economic experiments.
Photo – Twitter