India's Bonfire of the Bank Notes
The Briefing Room
BBC
4.8 • 731 Ratings
🗓️ 26 January 2017
⏱️ 28 minutes
🧾️ Download transcript
Summary
Why did India's prime minister ban the use of the country's most widely used bank notes?
On 8 November, the Indian Prime Minister Narendra Modi made a stunning announcement. As of midnight that day, all 500 and 1000 rupee notes would no longer be legal tender. The announcement came as a shock not only to the Indian public, but also to businesses, banks and some of Mr Modi's closest advisors.
Large queues formed at banks across the country as people tried to exchange their old notes for new ones and businesses came to a grinding halt. Agriculture was one of the sectors that was hardest hit. It was sowing season for India's farmers, many of whom had no means to buy the seeds, so reliant are they on cash transactions.
So what was Modi trying to achieve through this shock and awe tactic? Is this a stroke of economic genius or a highly damaging political move? And did the move have the desired effect?
David Aaronovitch speaks to a panel of experts to find out.
CONTRIBUTORS:
Nilanjan Mukhopadhyay, author of a biography about Narendra Modi, Narendra Modi: The Man, The Times
Ila Patnaik, former economic advisor to the Modi government and a professor at the National Institute of Public Finance and Policy
Douglas Busvine, Reuters bureau chief in New Delhi
Justin Rowlatt, BBC South Asia Correspondent
Producer: Phil Kemp Research: Serena Tarling and Kirsteen Knight Editor: Innes Bowen.
Transcript
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| 0:00.0 | Thanks for downloading this edition of The Briefing Room with David Aronovich. |
| 0:04.0 | Late last year, the Indian Prime Minister waged war on so-called black money, |
| 0:09.0 | cash that's either not declared for tax purposes or obtained illegally. |
| 0:14.0 | He did this by banning the country's most widely used banknotes. |
| 0:18.0 | It's a process known as demonetisation. |
| 0:20.0 | So what effect has this radical |
| 0:22.6 | policy had on the country's economy? |
| 0:32.1 | Wait a minute, I'm going to interrupt you because the Prime Minister is walking out of the door. |
| 0:36.3 | Imagine if tonight our broadcast was interrupted by an important surprise announcement. |
| 0:42.2 | We're going to hear from the Prime Minister. |
| 0:45.4 | Looking gravely down the lens, she announces that from midnight tonight, |
| 0:49.8 | all 10 and 20-pound notes will be declared invalid. |
| 0:55.0 | You'd hear that, immediately think, my God, what does that mean for me? |
| 0:59.0 | What does it mean for all of us? |
| 1:01.0 | And we're a people who only conduct around half of our transactions in cash. |
| 1:06.0 | Now imagine you live somewhere where pretty much every transaction is made in cash, where you wouldn't |
| 1:11.8 | even be able to buy any food without it. |
| 1:15.0 | And that will give you some sense of what happened in India at the beginning of November |
| 1:19.5 | when Prime Minister Narendra Modi addressed his country's 1.2 billion people. |
| 1:25.3 | To break the grief of corruption and black money, we have decided that the |
| 1:31.2 | 500-Ru- and thousand-rupy currency notes, presently in use, will no longer be legal tender from midnight to night. |
| 1:47.0 | Unsurprisingly, nearly three months later, India and its economy are still reeling from the note ban. |
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