On 8 November 2016, in an unexpected late-evening message on television, Prime Minister Narendra Modi announced the government’s decision to pull notes of theRs1,000 and Rs 500 denominations from circulation. The aim of this demonetisation, he said, was to “fight against corruption, black money, fake notes and terrorism.” Arun Kumar, an eminent economist who formerly taught at the Centre for Economic Studies and Planning at Jawaharlal Nehru University, has been amongst the strongest critics of the move. Kumar noted that the move would not tackle the issue of black money, as it does not impede the generation of black income. On 10 November, Kedar Nagarajan, a web reporter at The Caravan, met the economist to discuss the outcomes of the policy decision. Kumar discussed the scheme’s impact on economic growth, employment and on the shift towards a cashless economy.
Kedar Nagarajan: What has been the broad impact of demonetisation on the economy?
Arun Kumar: It has not fulfilled the three promises it was supposed to have, which were to tackle the black economy, counterfeit currency and terrorism. None of those have been affected because, as I have said, the black economy comprises two parts: black income and black wealth.