Articles

Why India Banned 86% of its Currency

December 8, 2019


This video is sponsored by Brilliant. The first 200 to use the link in the description
get 20% off the annual subscription. On November 8th, 2016 at 8:15 PM, TVs across
India flickered in unison. Dramas, cricket matches, and game shows were
all replaced with the face of Prime Minister Modi. In this unscheduled, surprise address, he
announced the 500 and 1,000 rupee banknotes – worth about 7 and 14 US Dollars, respectively
– would soon lose their status as legal tender. Without any monetary value, they would become
nothing but pieces of paper, useless for any and all transactions. ”Soon” meant in 3 hours and 45 minutes
– effective immediately at midnight. And those 500 and 1,000 rupee bills constituted
no less than 86% of all cash in circulation. It was as if the U.S. president suddenly announced
all 10, and $20 bills were worthless, only with a population 4 times bigger and
far more reliant on cash. The next few months were the result of a fascinating,
unintended experiment, as 1.3 billion people scrambled to replace their cash, the government
rushed to print new bills, and dozens of people died in the process. India runs on cash. It’s estimated that, measured by volume,
90-98% of all transactions in the country involve physical currency. and 85% of workers are paid in cash, while
only about half the population owns a bank account. These are optimal conditions for tax theft,
making it extremely easy and extremely common for earnings to go unreported, and, thus,
unknown and untracked by the government. The informal, underground economy makes up
something like 25 to 40% of the nation’s GDP. While salaried workers have taxes automatically
withheld from their paychecks, they represent only a tenth of all organized workers. Farmers, meanwhile, who make up about half
the nation’s workforce, are largely exempt – protected from politicians by their large
voting power, not unlike seniors in the United States. In 2016, only 37 million Indians filed tax
returns, 10 million of which were exempt, leaving only a tiny 27 million payers in a
country of 1.3 billion. Modi’s solution was simple: force everyone
to report their earnings. From November 9th, Indians had until December
30th to take their 500 and 1,000 rupee notes to the bank. There, they could be deposited for their full
value, or exchanged for other notes at the counter, for a maximum of 4,000 rupees per
person per day, later increased to 4,500 and then reduced to 2,000. Tax avoiders, big and small, now had no choice
but to declare their wealth or lose it all come January. Any strange, large deposits without explanatory
paperwork would be an instant red flag for the government. But here’s where everything went wrong: The central bank couldn’t prepare millions
of new, replacement banknotes in secret. Printing them in advance would therefore attract
attention, potentially cause chaos, and alert the very criminals the policy was meant to
target. For this reason, the Reserve Bank could only
start printing the new 500 and 2,000 rupee notes after the announcement – leaving it
with just under 4 hours to reprint the vast majority of the second-most populous nation’s
currency. Clearly, it was an impossible task. Now, having to bring cash to deposit or exchange
would’ve been disruptive enough for many Indians, but because the new banknotes were in such
short supply, long lines formed outside banks and ATMs for months. On top of that, the replacement bills were
slightly smaller, requiring ATMs to be retrofitted to use them. There were lawsuits, strikes, and protests
against what many saw as an unreasonable interference by the government in daily life. And despite all that, there’s good reason
to be skeptical the policy achieved its intended effects. Broadly speaking, there were two goals of
demonetization: First, to weaken terrorist funding, and second, to target the informal, black
economy. Both of which are hard to measure. Whether terrorist groups suffered any significant
losses as a result of demonetization, no one knows with certainty. And the black market is problematic precisely
because it can’t be measured. What we do know, according to the Reserve
Bank of India itself, is that 99.3% of the demonetized notes were later returned. In other words, the policy removed only a
tiny amount of money from circulation. Experts largely agree black money is mostly
stored in the form of gold, silver, real estate, and overseas bank accounts, not bills worth
7 or 14 US Dollars each. It’s true that demonetization added a record
9 million new taxpayers, but the mass disruption it caused also removed nearly the same amount
– 8.8 million people stopped paying that year, likely as a result of lost income. And while digital payments experienced a significant
spike in usage, there was no lasting effect after the new banknotes were fully distributed. Three years later, the only certain outcome
of demonetization was the immediate chaos it created across the nation: Hours wasted
at the bank, financial uncertainty for those most vulnerable, lost wages, and at least
several innocent lives. Worse, it came out of nowhere, not as a response
to inflation or unrest. So, why, then, given all that we now know,
is the policy still so popular in India, among those who personally paid its costs? Like Xi Jinping’s consolidation of power
in China, Modi successfully sold a story of unfairness, of targeting corruption and criminals,
to ultimately gain political support. Soon after, Modi’s party won the 2017 elections
of its 200-million person, most populous state in India, thanks, in part, to the popular
belief that demonetization was a collective sacrifice necessary to make the rich pay their
fair share. Anyone who protested the policy could easily
be labeled as a criminal trying to hide black money. Rather than turning the population against
the government, demonetization enlisted it, making people feel they were personally doing
their part to help fight crime. Modi’s party could’ve passed just as effective
but less disruptive laws targeting black money and explained them to gain support. Instead, he knew the most effective way to
convey information is by showing people, firsthand. Demonetization achieved its real goal of driving
political support by making a faraway, abstract concept tangible and interactive. Likewise, Brilliant is a math, science, and
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100 Comments

  • Reply PolyMatter November 29, 2019 at 4:00 pm

    The holidays are here and you finally have time off. Use it to learn something new with Brilliant: https://brilliant.org/Polymatter

  • Reply Everybody S December 5, 2019 at 5:45 pm

    India is a scam country

  • Reply spunk v December 5, 2019 at 5:53 pm

    And it was disastrous

  • Reply Shahid chaudharyzz December 5, 2019 at 6:16 pm

    It was actually a chance for corrupt people to make their black money into white

  • Reply noob noob December 5, 2019 at 7:01 pm

    This is NOT how you change out money. You declare that the money will no longer be issued by banks, and then that is it. Don't give a deadline. The lines at the banks will be short, people will like it, and it will do everything. The math will be easy to keep up with.

  • Reply Sry December 5, 2019 at 7:17 pm

    Western's are getting worried about Modi's success and his influencing power. And what's more hurting, is that Indians are so dumb, they are supporting others to cut their own legs. Some people never learn. Indians are made to be rules like donkeys and sadly, it's a fact and won't change, no matter how bad I'm gonna get bashed for this comment. Shame I belong to this country.

  • Reply Aswin Karunakaran December 5, 2019 at 7:36 pm

    Biggest scam by Modi government
    https://thepoliticalwriter.com/electoral-bonds-modi-issues-scam/politics/aswin-karunakaran/

  • Reply DamagedBroadcast December 5, 2019 at 7:51 pm

    currently 999k subs

  • Reply MR. gosh December 5, 2019 at 7:55 pm

    Dozens of people died in the process 🤨🤨🤨😶🤯

  • Reply Mr. John December 5, 2019 at 9:03 pm

    no offense but you sound like a Doomer. I guess we're on the same boat if that's true

  • Reply Thomas December 5, 2019 at 9:53 pm

    Can you imagine what India smells like?

  • Reply Earthless Rock December 6, 2019 at 1:11 am

    Dirty money become clean money, now it;s time to go to the toilet and make them dirty again….

  • Reply shashanka sai December 6, 2019 at 1:15 am

    Demonetization was a huge blow to the terror and militant groups in India. Just look at their activities before and after demonetization. They were severely reduced. (It can be measured by number of cases registered because of them)

  • Reply sai shashi December 6, 2019 at 1:30 am

    Terror funding network died on that day. Fake notes gone over night. Country changed to online transactions. New tax payers added.

  • Reply Captain Freedom December 6, 2019 at 2:30 am

    Stop pooping in the street.

  • Reply Captain Freedom December 6, 2019 at 2:31 am

    Only dozens died? Slackers.

  • Reply imran klgl December 6, 2019 at 2:48 am

    Andh bakths disliking the video 😂😂

  • Reply kewell65 December 6, 2019 at 2:49 am

    One of the biggest terrorist

  • Reply pava mana December 6, 2019 at 5:42 am

    Should have shown old photos of currencies that actually got banned. Underground economy is good way to describe !!

  • Reply Abhinav Singh December 6, 2019 at 5:47 am

    Considering, I am a Indian. It was a huge success. May be you have not heard the news during that time many notes were burned thrown in rivers. Terrorist activities declined. Don't always rely on stats . Ask dwellers about the result and we have not faced any issues at all. Only few majority faced problems everything was smooth

  • Reply your roommate December 6, 2019 at 5:49 am

    Modi: "Y'all mind if I fuck the currency and ecomomy up?"

  • Reply your roommate December 6, 2019 at 5:57 am

    Demonetisation in India in a nutshell:

    Mission failed successfully.

  • Reply Akshh December 6, 2019 at 6:10 am

    And this turned out to be the biggest blunder for the current government.

  • Reply Ather Rasool December 6, 2019 at 6:19 am

    Demonetisation achieved its goal? I don't think so.

  • Reply Kevin Cringe December 6, 2019 at 6:20 am

    Sucks for those who didn't have bank accounts. I just deposited my cash and went about being a beggar for a few months.

  • Reply PUSHPENDRASINH GOHIL December 6, 2019 at 6:38 am

    Just Like America has the Fake news like CNN we also have several fake news channel in India which were spreading rumors like new 2000 Rupees note had A chip in it so Government can track wherever it is.

  • Reply GYAN VAISHNAV December 6, 2019 at 6:49 am

    "DOZENS OF PEOPLE DIED IN THE PROCESS", well there were few incidents like this but this didn't had to do anything with the demonetization. I think people exaggerate these thing a lot to make their point.

  • Reply GYAN VAISHNAV December 6, 2019 at 6:56 am

    Recent studies does shows that because of the demonetization the terrorists had to face a might loose of 1 Billion USD in their fundings

  • Reply Gab Here! December 6, 2019 at 7:03 am

    HERE BEFORE 1 million subs!!!!

  • Reply Chaitanya Tejaswi December 6, 2019 at 7:09 am

    It's hard to say what the original intent was, but demonetisation has led to almost every employed citizen holding a bank account, and a major share of transactions (suburban/urban) taking place online (using services such as PayTM & GooglePay), all of which is traceable.
    Just like the thing with Jio, more Indians are now ONLINE.

  • Reply Murtuza Bhabhrawala December 6, 2019 at 7:09 am

    Worst decision ever. More than 150 people died. People did not have money for hospitals for daily use. Lack of ATMS made it worst

  • Reply mayank s December 6, 2019 at 7:14 am

    Fact is, this stopped the fake currency pumped in india by hostile neighbouring country and this has moved india to cashless society , recorded highest bank accounts opening and start using paytm like services , definetly showing good result slowly , well done PM Modi sir

  • Reply KeoEU December 6, 2019 at 8:00 am

    999K Subs

    In before 1 million subs

  • Reply Raphael Roshwalb December 6, 2019 at 8:41 am

    I am 1 millionth subscriber

  • Reply The one December 6, 2019 at 8:42 am

    Wait many people died??
    Hmmm maybe i was sleeping when this happened lol

  • Reply Bijoyendra Sharma December 6, 2019 at 9:17 am

    You have no idea what happened. Terror funding went up as the new notes were easy to duplicate. And 98% of cash came back. It was a blunder by modi. Don't try to justify it sitting in the US. You know nothing.

  • Reply SatwIK KUMAR December 6, 2019 at 9:22 am

    That was a bad move theo

  • Reply Crippled Human December 6, 2019 at 9:25 am

    Congrats on 1 million

  • Reply Adi December 6, 2019 at 9:59 am

    Guess what? Modi still came back to power with full majority this time.

  • Reply K K December 6, 2019 at 10:26 am

    Modi is an Illiterate leader. Just a puppet for ultra rich oligarchs

  • Reply QU4Ntum beast December 6, 2019 at 1:03 pm

    Due to this In my city I saw people
    burning loads and loads of cash probably millions of INR

  • Reply basshead420 December 6, 2019 at 1:44 pm

    Why are the segue to your sponsor so seamless? It's like you make the video to introduce your sponsor.

  • Reply Rishabh Sharma December 6, 2019 at 4:09 pm

    We have a dumb ass government right now…they would be gone soon.

  • Reply low-QUALITY crypto December 6, 2019 at 4:10 pm

    Cliffs:

    Did this to make Indians pay taxes

  • Reply nupur deshpande December 6, 2019 at 4:23 pm

    It wasn't unscheduled. And only the news channels played it.

  • Reply Shiv Chauhan December 6, 2019 at 5:37 pm

    You're really late to the party mate

  • Reply Membrane556 December 6, 2019 at 7:19 pm

    It was a very dumb move by their leadership as it did far more harm than good.
    Modi must be an idiot who thinks the very rich keep their wealth a vault filled with money like Scrooge McDuck.
    Besides even if it did work all the black market would do is switch to a different currency.

  • Reply nitz vision December 6, 2019 at 7:24 pm

    Westerners its your duty to make india better because millions might migrate to your countries like zombies …

  • Reply ANGEL POOJA December 6, 2019 at 7:38 pm

    Stupid Modi destroyed Indian Economy 😓 👎🏻

  • Reply RICH PEOPLE CLUB December 6, 2019 at 8:16 pm

    Brother your answer is wrong .. India country prime minister does not have knowledge about economy still today that effect continued

  • Reply Gravity Priest December 6, 2019 at 9:42 pm

    This is why so many people like (whether smart or not) gold and silver. India couldn't make gold and silver useless even if it was the law. Paper money can be made useless at any time.

  • Reply Gen Li December 6, 2019 at 10:10 pm

    I wish you guys to watching this video, please.
    https://m.youtube.com/watch?v=BjgSOYRZqIo

  • Reply Yash December 6, 2019 at 10:36 pm

    Don’t worry India will become superpower by the next month.

  • Reply s sharma December 7, 2019 at 12:50 am

    The economy is fucked thanks to him. Straight from 8% to less than 4.5% GDP growth in just three years. Btw, the growth has to be much lesser than 4.5 bc that's the govt's report say and modi govt is notoriously infamous for lying in official statements. It's really a shame, what a few powerful greedy people can do to meet their wants without regarding the people or the system. As long as there are politicians like him (constituting about 70% of the parliament) in the game, India will never ever be able to be a developed and strong nation at par with USA . These guys have made corupption a necessity in the country.

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  • Reply INERT December 7, 2019 at 2:42 am

    In India, people don't properly wash their hands, or at all, after taking a shit. All of those bills were coated in fecal matter and e coli after being handled by a billion germ-infested savages. Replacing the bills prevented a poo-related public health crisis and millions of corpses, which would been floated and clogged the toilet that is the Ganges.

  • Reply Prag Bikram Shah` December 7, 2019 at 3:11 am

    This was all planned

  • Reply Kewal Patel December 7, 2019 at 4:02 am

    My business has grown after demonetization

  • Reply TheFifaGamer2000 December 7, 2019 at 4:13 am

    I’d call this a serious case of demonetization

  • Reply Ayush Patel December 7, 2019 at 4:18 am

    Useless govt … Indian govt and Brazil govt are competing for the worst govt crown …

  • Reply Sajid Khan December 7, 2019 at 4:23 am

    Banned it because our pm is dickhead honestly he is an uneducated guy we are paying for this moron's step
    GDP decreasing unemployment increasing
    People dying hungry
    This what we see when we give power to an uneducated who is murderer of 5k people for his vote bank of Hindu

  • Reply Abhishek Awasthi December 7, 2019 at 4:24 am

    demonetisation Is is the biggest political scam in the whole world

  • Reply What The Dude December 7, 2019 at 4:29 am

    The dude says :- A guy on pot woke up the next day & thought let’s “TRY” this
    Cause I can
    Result will be benefit
    And it was
    To Reliance

  • Reply Hidden Talents December 7, 2019 at 5:28 am

    Nice and unbiased case study about demonetisation and i liked it as an Indian. You revealed true facts without bias

  • Reply illam11 December 7, 2019 at 7:03 am

    Not 99.3 it was actually 110 percentage 😄😄

  • Reply jabari edwards December 7, 2019 at 7:16 am

    Chaosemperor.com – The Moorman Dynasty Trust & Percy Moorman. Our only way out of this financial catastrophe.

  • Reply Gaurav Khulbe December 7, 2019 at 7:39 am

    Misleading people is a new business.

  • Reply Rocket man December 7, 2019 at 7:51 am

    Modi chot

  • Reply viplove sharma December 7, 2019 at 8:03 am

    https://youtu.be/Rfe2SbMgovQ also we met this legend.

  • Reply nick max December 7, 2019 at 9:21 am

    India is going down and 20% of its people are going to be treated like Nazi's treated Jews.

  • Reply Naseem Shah December 7, 2019 at 9:22 am

    successfully failed the mission.

  • Reply Mohammad Hossain December 7, 2019 at 11:32 am

    I am mad at India because they stopped exporting onions in our country.

  • Reply M. S.S. December 7, 2019 at 1:19 pm

    You are on point PolyMatter. Blind followers still praise demonetisation.

  • Reply bananaempijama December 7, 2019 at 2:05 pm

    Jfc what a stupid idea.
    And they were not even prepared for this 🤦‍♂️

  • Reply Manas Laddha December 7, 2019 at 2:08 pm

    Bruh your ad transitions are so smooth

  • Reply farzan 7 December 7, 2019 at 2:54 pm

    The only reason India demonatised 86% of it currency was cause it's prime minister is stupid

  • Reply The Cube December 7, 2019 at 5:45 pm

    This is what happens when you let a tea seller become a PM. Its like letting a school kid do open heart surgery. India needs a revolution to overthrow its corrupt foplish leaders now more than ever before !

  • Reply Mohd. Moazzam December 7, 2019 at 6:01 pm

    It's disheartening to say the fact that my PM is ultimate MORON
    He has failed in each and every dimension.
    No one in the country can claim he has done anything good. He wins Election by fooling people, playing with emotions and his Ultimate Trump Card of RELIGION.
    We Educated Indian compare his regime is Moussilini, Hitler or Mugabe.

  • Reply TheErraticTheory December 7, 2019 at 9:56 pm

    “tax theft” is so very ironic since taxation is theft.

  • Reply Musharrof Hossain December 7, 2019 at 11:41 pm

    You were featured on pewdepie

  • Reply Shray Sharma December 8, 2019 at 12:04 am

    Still 90% of India runs on cash.. get a life dude?! Fucker!

  • Reply Shray Sharma December 8, 2019 at 12:09 am

    We love Modi and his polices, he is coming back in 2024.. 😉

  • Reply Jeswin Jose December 8, 2019 at 1:56 am

    I am an Indian, i can proudly say that demonetisation is a total failure.

  • Reply IMAGINE MY FREEDOMS third templers December 8, 2019 at 2:11 am

    All this trouble because of a couple greedy old pedophile jews.

  • Reply Jon Haberski December 8, 2019 at 2:25 am

    Not suprised they are fucking idiots and scammers

  • Reply Jon Haberski December 8, 2019 at 2:28 am

    Im guessing this dickhead didn't get re elected

  • Reply Tars Tars December 8, 2019 at 2:35 am

    There was rumors before note banned so it was failure , rich people changed their notes

  • Reply Santhosh Unnithan December 8, 2019 at 4:45 am

    wrong wrong wrong,,,wow how can you get so many facts wrong…dont read western news media while preparing videos like this..

  • Reply 002h December 8, 2019 at 4:59 am

    I think u should analyse the point that terrorism faced a huge funding crunch sometime.bcz of which naxal terrorism and kashmir terror ecosystem went silent during this period completely

  • Reply MarcAFK December 8, 2019 at 6:09 am

    Criminals don't use the smallest notes, they always use $100 US federal reserve notes….. Always….
    Ok except for treasury bills, the criminal bankers love those.

  • Reply Nirup H M December 8, 2019 at 6:46 am

    Can you give number of people died for the cause of demonitization

  • Reply Usman Javed December 8, 2019 at 7:14 am

    Indias is the new age Nazi state, hindus worship a penis(shiv leng),
    Death to all Hindutva leaders.
    hindustan murdabaad

  • Reply FragArena99 December 8, 2019 at 7:29 am

    Because India is run by assholes and retards thanks to it's socialist roots. No surprise.

  • Reply Ein Ausländer December 8, 2019 at 8:58 am

    Cause Indians can just use their own shit as currency

  • Reply Sanu Rawat December 8, 2019 at 8:59 am

    Demonetization is criticized because it broke the spine of many illegal & black money….

    Reason of GDP drop is the black money which is now hard yo circulate….. it was a Hard step…. & i appreciate it…. People will criticize it & blame it for GDP slowdown…….. Like seriously… 😂

  • Reply Sanu Rawat December 8, 2019 at 9:01 am

    I also praise Demonetization because it helped to go people Digital…. U can see the stats of Mobile banking user….

  • Reply debol December 8, 2019 at 9:33 am

    The ₹500 and ₹1000 u showed are the new notes. The old notes looked different.

  • Reply Acyberpath 1 December 8, 2019 at 9:33 am

    Well your assumption is fair enough, but in India it's a massive corruption ever in the history.

  • Reply debol December 8, 2019 at 9:39 am

    Also the elections was in 2019 and not 2017.

  • Reply Mr.Tweezy007 December 8, 2019 at 10:34 am

    Here we call it a blunder. The worst part? The conman Modi got reelected.

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