As the world was distracted by the U.S. presidential election last week, India’s prime minister made 84 percent of the cash in circulation worthless.
Narendra Modi on Nov. 8 declared that the two largest bills in circulation — the 500 and 1,000 rupee notes — were no longer legal tender.
Citizens in the world’s second most populous nation had no advance warning; Modi simply went on television and told them that the two bills would become worthless at midnight. Indian is the world’s seventh largest economy.
The move wiped out the value of 22 billion banknotes worth $278 billion, The Australian’s Greg Bearup estimated. Those bills composed 84 percent of the cash in circulation in India.
India citizens can take the notes to banks and deposit them, but any deposit of over $500 will have to be explained, Bearup reported. Those who cannot justify the deposit will have to pay a 200 percent penalty on it.
“In effect, it would cost them more than the value of the deposit,” Bearup wrote. “They may as well throw the money out the window, and this is happening.”
Modi is trying to kill India’s cash economy with the move and force the nation’s people to put their money in banks.