India should Take Note of These Demonetization Failures
BENGALURU: Prime Minister Narendra Modi’s surprise move to demonetize last week has taken everyone by surprise and created a storm. People are still trying to make sense of this move and trying hard to figure out what to do with their 500 and 1000 notes.
It’s not the first time that something like this has happened, as there are many instances across the globe when governments have taken decisions on their own and left people in lurch and distress. While the transition has taken place smoothly in developed nations, such as the decimalization of the British pound in 1971 or the introduction of the euro in 2002, others in dictatorial regimes have not gone according to the plan. Given below are some examples:
Amidst all the doom and gloom, Soviet Union under Mikhail Gorbachev in January 1991 withdrew ruble bills from circulation in a move to put a lid on the black money– similar to PM Modi’s initiative and intent. The invalidation amounted to nearly one-third of the total money in circulation. The reform failed to keep inflation in check and instead led to the disintegration of the Soviet Union.
In 2010, the dictatorial regime of then-dictator Kim Jong-Il started a reform that knocked off two zeros from the face value of the old currency. It was an effort to get a hold on the economy and tighten screws on the black marketers. But poor harvest left the country in deep trouble and severe food shortage.
The country in 1982 got rid of its 50 cedi notes to crack down on tax evasion and root out corruption. The move led to mass protests and eroded people’s confidence in the banking system.
Dictator Mobutu Sese Seko faced severe economic disruptions in the early 1990s when his administration mounted numerous economic reforms. A plan to withdraw obsolete currency notes from the system in 1993 went horribly wrong. The move saw a surge in inflation and a collapse in the exchange rate against the dollar.
In 1984, the military government led by Muhammadu Buhari initiated an anti corruption drive that involved issuing new banknotes with a different color. It also made it mandatory to replace the old ones within a stipulated period. The move was one of a series of steps taken by the government that failed to help the debt-ridden economy.
In 1987, the country's military junta invalidated as much as 80 pct of money in circulation. The main motive of the move was to take on the black market. Deepening economic crisis led to mass protests across the nation.