Seminar: "Meddling with the Fiat Money: Political, Economic and Social aspects of Demonetization in India". Speaker: Arnab Roy Chowdhury

On the 5th of February at LSES seminar Arnab Roy Chowdhury will present the results of his current research "Meddling with the Fiat Money: Political, Economic and Social aspects of Demonetization in India"

In the evening of 8November 2016, Prime Minister of India Narendra Modi declared that currency notes of Rs 500 and Rs 1,000 denominations would cease to be legal tender. Many other countries, such as Australia and Myanmar, have demonetised currencies of various denominations; so, demonetisation is not new in world politics. Modi’s dramatic declaration, and the drastic implementation of the decision, was initially presented as a war against black money, tax evasion, and corruption. But demonetisation became a highly contentious issue. How?

  In India, 81 per cent of the workforce works in the informal economy, and 80 per cent of all economic transactions are conducted in cash. The operationalisation and implementation of demonetisation was mismanaged so badly that it affected 86 per cent of legal currency tender and crippled the rural economy.

  The effect of demonetisation on the informal sector economy cannot be fully gauged because of its ‘shadow’ and ‘underground’ nature. Small-time businesses closed; new forms of corruption and illegal transactions emerged; and uncertainty in the economy led to a loss of confidence in the banking system. Patterns of consumer behaviour changed, and the shortage of currency notes in automated teller machines (ATM) led to several deaths in queues of people withdrawing or depositing money. In the following few months the gross domestic product (GDP) fell two percentage points – from 7.6 per cent to 5.6 per cent.

  Now, 99.30 per cent of currency notes have returned to the banking system. Clearly, there was little counterfeit money in the system. The ruling party is now shifting goal posts and attempting to argue that demonetisation aimed to promote digitisation, curb terrorism, and boosts the banking system. This is an attempt to post-rationalise their decision.

  The political acumen, rationale, and decision making that led to demonetisation have been questioned. I argue that the decision was largely political. Its shock value reflected the ruling party’s dum (meaning machismo in vernacular Hindi), or its power of making arbitrary and unilateral policies and decisions. Demonetisation shows a facet of the post-truth politics of the religious rights in the Indian mode of democracy: their Hindu majoritarianism and populist politics establishes popular legitimacy through emotional appeal, rhetoric and spectacle – not rational argumentation. Perhaps not contradictorily, demonetisation shows the current government’s mediocrity – they do not understand crucial aspects of Indian society, policy, governance, or the economy. 

The seminar is open for everyone interested in the topic! Working language of the seminar is English.

Start time: 18.15
Venue: Myasnitskaya str., 11, room 325.  

If you need a pass to HSE, please e-mail your full name to egudova@hse.ru