India could soon come to a shuddering halt, says Pratap Bhanu Mehta, and all thanks to an illconceived anti-corruption move by the government. Prime Minister Narendra Modi thought he
could strike a blow against the criminal hoarders who hold an estimated $500bn of undeclared
wealth in offshore accounts, by abruptly declaring high denomination banknotes (which make up
a large part of the offshore accounts) invalid. This wouldn’t hurt people legitimately holding these
notes, he assured the public, because they can just go to a bank and change them for newly issued
ones. Alas, Modi’s “gamble” is coming badly unstuck. The notes account for some 86% of India’s
currency, and tens of millions of workers are having to take time off to queue at banks, often losing
days of paid work. People with debit cards can’t use them, because the new notes don’t fit ATM
machines. And the central bank can’t print enough to meet demand. An operation planned to take
50 days looks likely to take four months. Soon businesses will be unable to pay their workers, who
almost all receive their wages in cash; farmers are running out of cash to pay for seed for next year’s
crops. If Modi is booted out in the 2019 elections, this fiasco will be a large part of the reason why.
