Why India Banned 86% of its Currency

Why India Banned 86% of its Currency


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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this video.

100 Comments

  • PolyMatter

    November 29, 2019

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

    Reply
  • Reviewers Review

    November 29, 2019

    Biggest blunder in the Independent india. Modi proved he is as arrogant and stupid as his critics claim.

    Reply
  • No Name

    November 29, 2019

    indian Thief that has 1 billion in cash exists
    Indian gov: imma end this man's career

    Reply
  • S R

    November 29, 2019

    Modi is a hypocrite.

    Reply
  • Captain Code

    November 29, 2019

    get ready for those angry indian comment threads where they just quarrel about anything. lol.

    Reply
  • Lee cardio

    November 29, 2019

    one of the most BS thing ever done
    literally nothing happened
    only poor and middle class people had to suffer becoz of it

    Reply
  • drsupremo88

    November 29, 2019

    They done it for tax I guess

    Reply
  • ANIRUDH .L

    November 29, 2019

    2:50 it's not ₹4,000 it's ₹2,000,00

    Reply
  • Cory Mck

    November 29, 2019

    Because Modi is a fascist idiot with fascist followers.

    Reply
  • Gaurang Potdar

    November 29, 2019

    Successfully painted Modi as a bad politition.

    Reply
  • Captain Code

    November 29, 2019

    wait until congress declares Polymatter works for BJP. hehehe

    Reply
  • Gaurav Sharma

    November 29, 2019

    86% cash not currency🤦🏻‍♂️

    Reply
  • Gurjinder Singh

    November 29, 2019

    I was in India at that time and I am glad you showed the True Story , objectively.

    The Crowds near the ATM, it made everyone fear if they could get access to the Money they own. Limited no of ATMs worked, the ones that did were largely overcrowded and did not have sufficient cash to "fund" the local population.

    Reply
  • Bilal Sheikh

    November 29, 2019

    This is what happens when you make an uneducated power hungry maniac the Prime Minister.

    Reply
  • Arghajit Bhadra

    November 29, 2019

    One of my friend got a BMW 7 Series on that night from his dad. He was shocked. He never asked for any car. Still his father gave him.

    Reply
  • Om Mahajan

    November 29, 2019

    It was such a chaos😥
    Every Indian will remember!!!

    Reply
  • TrinhStudios

    November 29, 2019

    Tax theft? What about money theft from the government that uses the money to boost their own salary?

    How about we make the salary of all of them equal to the median salary of the people? Fuck the corrupt scum.

    Reply
  • a a

    November 29, 2019

    Organized Loot, Legalised Plunder!

    Modi Is Thief In Charge!

    Reply
  • Slo Mo

    November 29, 2019

    Did Indian Congress agree with it? Or prime minister alone had the authority to do it?

    Reply
  • Ethernality

    November 29, 2019

    My dolla broke?

    Reply
  • iqbal sahibil

    November 29, 2019

    This idiot is now dragging the indian economy down with the growth rate slowest in almost a decade… Then they try to justify it as western nations trying to bring down india and brag it would have been slower if not for his leadership.

    Reply
  • Bruce Wayne

    November 29, 2019

    Anyone remember that man ?! Maa chudi padi hui hai 😂😂

    Reply
  • Jonas

    November 29, 2019

    India copying China in a half assed way. China is good at what they do. You are what you do.

    India stay India! beautifully chaotic, overcrowded, with horses browsing on open real dumps on the banks of holy rivers and feral dogs everywhere eating the poop of the other animals.

    Jk I love India. Becoming a surveillance state doesn't suit you. Making a truly non corrupt, and highly efficient agency that passes out free bank cards would be more in character imo. Probably more effective too.

    Reply
  • Akash Kumar

    November 29, 2019

    It was a joke, not even a funny one.

    Reply
  • Arkadeep Kundu

    November 29, 2019

    Tax evaders exists
    Modi: I'm gonna ruin this man's entire career
    Economy in shock: You just ruined everyone's career.

    Reply
  • Ashok Ratn

    November 29, 2019

    Modi is is worst he is fascist and anyone who questions hum is labeled as Anti-national , he is a huge propaganda machine and recently his BJP party has been seen taking funding from terrorist funding companies, in his speeches he lies like it's nothing even a simple Google search is enough to expose him and his criminal BJP party, trust me if you're a criminal have charges of murder, rape, communal violence , corruption and much more you are mostly welcome and also they will drop all the changes against you, even a terrorist is now a part of his fascist party. Don't believe media Modi is backed by India's richest man and has successfully bought all of the TV channels to lick his balls and there are thousands of Propaganda and fake news pages on various social media platforms. But some people are fighting for what is right. This guy has brought down India's gdp to it's feets. God save India from this 21st century Hitler

    Reply
  • sharath chandra

    November 29, 2019

    It was a brave and bold attempt by the government. Should've been executed in a much better way.

    Reply
  • the.abhiram.r

    November 29, 2019

    and now they have the wierdest currency 😂 who tf needs a 3 rupee coin

    Reply
  • Amorous Daisy

    November 29, 2019

    Where the hell are bhakts?

    They are busy building temple.

    Reply
  • Pritish Patil

    November 29, 2019

    3:39
    Wrong information, new bank notes were printed in advance, government had started printing 6 months or so ago…but in top secrecy… It was very well planned operation by government

    Reply
  • Satyam S

    November 29, 2019

    The lack of research for this video is mind boggling.
    1. "Dozens of people died in the process" ?? Where did you get this? In Case you got it from the headlines of a 'major' newspaper like TOI or The Hindu, please know that they edited the news & published formal apology for the fake news.
    2. "Almost only half the people have bank accounts." The Govt literally opened bank accounts for everyone before banning those currency notes.
    3. "The real aim was to drive political support like Xi Jinping does in China"
    3 years after the demonetization the Modi Govt got democratically elected with more seats than they had 5 years ago & this guy compares it to authoritarian regime like China.😂
    Venezuela attempted similar stuff & riots, protests forced them to take back the order despite having miniscule population compared to India & you think Demonetization really had no effect other than inconvenience & people backed the Govt to this day?

    Reply
  • Ender13123

    November 29, 2019

    Damn this is what happens when you punch above your weight class, idiots

    Reply
  • aditya singal

    November 29, 2019

    Incomplete information in this video! Seems like it was an ad for Indian viewers for Brilliant!

    Reply
  • Ajay Satheesh

    November 29, 2019

    From India hate the politics

    Reply
  • ChintanCG

    November 29, 2019

    So modi probably got the idea from doing a course on brilliant..lol

    Reply
  • Shared Knowledge

    November 29, 2019

    Great video highlighting yet another way India leaders are beyond clueless and horribly misguided. But, unlike all the similar incredibly stupid decisions by China, at least India’s stupid decisions are out in the open which hopefully leads to a much better future than China pretending they can hide their evil ways and don’t need to change anything.

    Reply
  • Avery the Cuban-American

    November 29, 2019

    Will Smith was on Indian Idol? That’s hot, that is hot

    Reply
  • Moon Medusa

    November 29, 2019

    What was Will Smith doing …….

    Reply
  • Bharat Narang

    November 29, 2019

    That video randomly transitioned into an ad

    Reply
  • Irgend so ein Typ

    November 29, 2019

    PolyMatter : Everything about Asia since 2015

    Reply
  • Chirag Baukhandi

    November 29, 2019

    polymatter is like harrypotter

    Reply
  • The One

    November 29, 2019

    The demonitization completely failed in India to achive its goal, ie to fight black money. It was claimed that over 60% of the notes were stored as black money an thus the ban was justified. Yet, after 2 years from ban, it was reported that 99% of the bank notes in circulation were returned and exchanged. All this trouble for nothing.

    Although one good thing came out of this, which is Indians heavily started using online wallets and apps like Google Pay for daily payments and are slowly but steadily moving away from cash transactions. Hell, even small transactions of Rs 10 are done over these wallet apps which would have been laughed at 2 years ago.

    Reply
  • Lalit Patil

    November 29, 2019

    I love the way foreigners pronounce Modi Lol!

    Reply
  • Arun Chhatwani

    November 29, 2019

    Really grateful to you for presenting the story as it is. And not trying to instill a sense of ego in indians so that they'd subscribe to your content. You have got integrity higher than our leaders and Media

    Reply
  • Tom W

    November 29, 2019

    Please do a video on copy writing you're a boss

    Reply
  • Luciano radice

    November 29, 2019

    I don't get how anyone can think that's a good measure

    Reply
  • FATEH ÄL FENNI

    November 29, 2019

    That's why people should never trust the news
    Plus 50% hv bank accounts?!
    You Are So Optimistic Dude

    Reply
  • Wolf Rage

    November 29, 2019

    and more than 100 people had to give their life for standing in bank lines…… it's actually a declared murder, and unfortunately, the whole country accepted it

    Reply
  • Yash Kshirsagar

    November 29, 2019

    5:28– the new bank notes were for ₹500 and ₹2000, not ₹1000

    Reply
  • FATEH ÄL FENNI

    November 29, 2019

    BLACK MONEY???
    EVEN YOU

    Reply
  • Ahmad A

    November 29, 2019

    Indians are the #1 tax evaders in the world and it was bout time they learn to contribute to their own country

    Reply
  • Bharath kumar n

    November 29, 2019

    https://youtu.be/Cj11RfJt2JI

    Reply
  • Ayub

    November 29, 2019

    Everything was affected, Hospitals denied to admit patients even a in emergencies, Marriage events were cancelled or preceeded in terrible way, Daily supplies were affected,lots of wives lost their savings, lots of positive attention was earned by modi in this political experiment, Economy just went from crap to hell, Terrorist found another way,of dealing with currency problems,Black money that is not even stored as normal currency and is mostly outside india had no affect at all,everytime big hands make a move no one is more troubled than citizens of the nation.

    Jai hind,
    May the future of nation be prosperous.

    Reply
  • andlufds

    November 29, 2019

    I was visiting India when it happened, it was caos, my foreign card only gave me 2k's and no one had change, stupid prime minister!

    Reply
  • Bhavin Tolia

    November 29, 2019

    "Dozens of people died in the process.", False, the official figure is ~100 people. Informally, 12000 people lost their lives.

    100s of 1000s of people especially vulnerable women were disempowered

    Reply
  • Michael Choe

    November 29, 2019

    This is why I’m blessed to be born and live in the USA

    Reply
  • Manav Gajera

    November 29, 2019

    I was in Mumbai at that time for interview of US Viza. I got Visa in morning, so happy, and later same day Trump was elected in US. Was sad because I wanted Hillary to win. And that evening was the worst, when modi declared that 500/1000 rupees were banned. I was actually in a mall, shopping, when that happened and the shopkeeper said that the currency was banned like an hour ago. 3 major events in a day. Will never forget it.

    Reply
  • Diggy R.

    November 29, 2019

    It failed. But still people got fooled believing that they helped nation and govt to fight terrorism and black money also it's true that who ever opposing it labelled as they hv black money/anti national It was win-win situation for govt because people blindly belived the govt and fooled.

    Reply
  • Sugar Daddy

    November 29, 2019

    Polymater should have talked about BHIM UPI, and how it is easy to pay and receive money now. This is all done by Modi government only

    Reply
  • Namit Jain

    November 29, 2019

    When foreigners understand India better than Indians! You were spot on right till the end! But yeah, be ready for the onslaught of Modi voters and Modi's own IT cell trying to discredit this video.

    Reply
  • Vedant Chavan

    November 29, 2019

    Today India use electronic methods to pay compare to cash pay.
    Well demonetization was not that effective but it brought e pay system in India which is now helping to reduce corruption
    Every side has good thing, think positive- everything happens, happens for good

    Reply
  • Shawn Huffman

    November 29, 2019

    Be careful who you vote for. America is only a few steps away from the same process!

    Reply
  • Pedro Ivo

    November 29, 2019

    Awesome to see some new content! Keep it up!!!

    Reply
  • indianetizen

    November 29, 2019

    Average Black money : invested 99% of itself in land gold tangibles..
    Modi : bans notes, pose of the PR ✌️😎
    Black money : puts 1% cash in accomplices account.
    Economy : 🖕🏼

    Reply
  • Kapil Nandal

    November 29, 2019

    And who pays you to put these lies here lol Modi is the future 🇮🇳🇮🇳

    Reply
  • girishnakhua

    November 29, 2019

    Wow ! This video cannot be far from truth….

    Politics had nothing to do with this… it was pure & simple national security issue.

    Reply
  • Aditya Shetty

    November 29, 2019

    Someone found Logical American..
    Now world got to know why action has been taken

    Reply
  • Ex plorer

    November 29, 2019

    India is now a cashless country.

    Reply
  • Omoshne

    November 29, 2019

    I've followed the news for years yet I have never heard anything about this. How weird.

    Reply
  • Томас Андерсон

    November 29, 2019

    All hail socialism! Justifying horrific acts and grabbing power has never been easier!

    Reply
  • karthi k

    November 29, 2019

    You forget to mention most important points.
    1) The currency were printed in a rush. This made printing mistakes like characters mis aligned mostly in 500₹. This made hard to differentiate authentic currency from duplicate currency.

    2) To circulate new currency in short period of time, they introduced large number of 2000₹ ( very high value currecys). But majority of indians are middle class who use 100,500, 1000 RS for daily spending. Those business and services that are below 2000₹ are forced to lend and some shattered entire business. Even to this day many didn't observe this catastophy.

    3, Modi is from Rss which is well known for facism ideology. They're too narrow minded that they care for nothing except Hindising entire India. The new currency were kept in mind to add hindi style letters init.

    4, Many people dint vote him. Similar to Cambridge analytica, there's IT called IPAC. They conduct survey on demography, caste, mindset of people and collect data to manipulate people for votes. They usally use hindu vs muslims, backward class vs dalits ( depending upon majority) to make insecurness , spread hatred and play hero come to power.

    5, The election machine data mismatch is not properly addressed. They're beleived to tampere EVM (voting machine) to votes.

    Reply
  • Dead Pool

    November 29, 2019

    shitbox..good thing not subbed 😀

    Reply
  • GBP FX

    November 29, 2019

    And Modi got re-elected. What does that mean.

    Reply
  • kakashi zen

    November 29, 2019

    Modi ki maa ka bhosda

    Reply
  • The Sapien

    November 29, 2019

    Income tax is the crime. Calling people "criminals" for not paying income tax, means you're a henchman for the overlords of the world. You're a thug on the wrong side of history.

    Reply
  • Akhil Nair

    November 29, 2019

    On point!

    Reply
  • Martins

    November 29, 2019

    It feels weird to watch that many videos about economics and realise money only has value because people don't question it

    Reply
  • Anthony Oodie

    November 29, 2019

    Italy's informal, cash business dealings would make an Indians skin crawl.
    Shit this video is a joke.

    Reply
  • Priyanshu Kundu

    November 29, 2019

    Fucker u do not even know the outcome and the correct numbers and u made a video just out of nowhere with bullshit information and crapheaded content. I am not a modi supporter but what i know for sure is that our country's economy boomed( not right after) demonetization (but later) and it has shown good effects.

    Reply
  • Andrew plack

    November 29, 2019

    Tax is theft… the Indian government??? Lol corrupt!!!

    Reply
  • Mayank Singh

    November 29, 2019

    Just one line

    Huge Failed experiment !!!

    Reply
  • Jaqen H'Ghar

    November 29, 2019

    Did you or RealLifeLore come first because you use the same type of thumbnails as him almost like you're trying to fool his audience into clicking on your videos or vice versa?

    Reply
  • AK Brahma

    November 29, 2019

    500 RUPEES BANNED, is equivalent to 7 Dollars, and plans to curb Black Money by it. Just becoz the honest tax paying man is dirt poor don't mean the mafia is too.

    Reply
  • abhishek shah

    November 29, 2019

    Some hefty rich people with so much of black money , after the demonetisation burnt bags full of money and some thrown into the river just because they have so much black money that just can’t be cash replaced
    Also many people bought Gold from the black market against the old money
    Most rich people was all the Fuel Pump Owners abd Hospitals as they both have authority to accept the old notes and exchange to the new ones 😎
    Yes it was a big chaos but in the end no one knows what India benefited from this all….
    (‘But mind it there is not a single terrorist attack on civilians after this new government so people somehow believe in their leadership despite bearing with all this issues india have)

    Reply
  • TeslaKaniv

    November 29, 2019

    0:08 8th of Nov 2016 was chosen to make the world look the other way. US elections. Indian gov proved that it is evil and manipulative. Greatly inconveniencing 1,366,417,754 people is evil in my books.

    Reply
  • Shayan

    November 29, 2019

    I m Indian(unfortunately) and still don't know why

    Reply
  • i. Kurdi

    November 29, 2019

    Nice sigway though

    Reply
  • XSportSeeker

    November 29, 2019

    First time I heard about this I went – holy shit, are they crazy?
    Honestly, I gotta give kudos to fellow Indian citizens… in several other countries this would have immediately prompted a massive revolt toppling the government and making things even worse.
    Here in Brazil, nothing similar like that happened, but I do remember the times of hyperinflation and then the horrible bank account freezing time that put tons of brazilians into miserable states and forced a whole lot of other brazilians to outright flee the country.
    It takes a real sociopath to do stuff like that. We're still feeling the consequences almost 3 decades later.

    Reply
  • Nishant Gupta

    November 29, 2019

    Modi is slowly and steadily destroying India.
    You ask any literate Indian and he will agree on that.

    Reply
  • Joseph Coluccio

    November 29, 2019

    Whatever a government touches, it destroys.

    Reply
  • Anubhav Bhatnagar

    November 29, 2019

    mASSterStroke FTW xD

    Reply
  • Lynx Lead

    November 29, 2019

    holy shit that sounds dystopian as fuck, making the populous think they help while letting them to useless stuff .. damn i would be so mad

    Reply
  • The asiatic Lion

    November 29, 2019

    This might be a solution to devaluing a currency

    Reply
  • VeroMithril

    November 29, 2019

    Cows should replace currency altogether

    Reply
  • Grumbles

    November 29, 2019

    Youtube: Did somebody say demonetization?
    Entire Userbase: No daddy! No!

    Reply
  • Dim Sum

    November 29, 2019

    The Indians did it their way:-(.

    Reply
  • Dev Bali

    November 29, 2019

    Is India PolyMatter's new China? I love it!

    Reply
  • TerribleTonyShow

    November 29, 2019

    India: Has high denominations of cash that actually functions
    Indian Government: No

    Reply
  • TerribleTonyShow

    November 29, 2019

    6:20 Youtube in a nutshell right now.

    Reply
  • World Wide Wong

    November 29, 2019

    that sponsor transition…how does he do it?

    Reply

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