Lessons from India’s cash experiment

Move aimed to reduce illicit trade while generating government revenue.

India has been serving as a real-world financial laboratory for the past two months.

I doubt this was the initial intent, and I doubt wide swaths of the Indian population relish having been cast in the role of unwitting test subjects.

Nonetheless, at this point it’s worth assessing the lessons learned from the country’s radical move on cash use.

On Nov. 8, Prime Minister Narendra Modi unveiled a surprise to rival the U.S. election result that followed just a few hours later: He announced a banking holiday, declared all 500 and 1,000 rupee notes in circulation to be null and void, and required these paper notes be exchanged for new tender.

For Modi, a reform-minded leader with a reputation for bold moves, this was perhaps his boldest stroke yet.

These notes, India’s largest denominations (essentially the equivalent of $7.50 and $15) comprised 86% of all cash in circulation.


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