India’s Demonetization Crisis Continues With No End In Sight

As I’ve written about previously, India’s attempt to shift their citizens to digital transactions – with the excuse that it’s about reducing crime and increasing tax revenue – is causing a disastrous crisis.

What we are seeing in India is a totally man-made crisis. India’s PM Narendra Modi is pushing his utopian vision while he is nice and comfy in a government office. Meanwhile, his people are paying the price.

Despite their high economic growth rate – at least according to official stats – it’s difficult to see how the economy of India is actually growing. In fact, thanks to Demonetization, India has already had their growth estimate cut by the IMF from 7.7% to 6.7%

Considering that economic indicators generally lag, the real decline is likely much worse. When you consider that India has a high inflation rate, and continues to have rapid population growth, there’s a very good chance their economy is not actually growing.

Is India’s economic crisis any surprise?

Think about it this way: Why is it a surprise that instantly invalidating the currency (500 and 1000 Rupee notes), most used by the poor and middle-class of India would do anything but cause a disaster?

As we often see when a government tries to force top-down economic solutions upon a country, things almost never go as planned.

The complexities of the day-to-day decision of individuals and families and businesses – multiplied millions of times – is simply too much information for a government to easily manage or alter.

By taking away the most used currency, and causing runs on banks and rising desperation, India’s government is sacrificing the well-being of their people at the altar of government power.

Demonetization is about control

I don’t believe the government of India when they say they just want to prevent crime and increase tax collection. It’s really about control. They want to be able to track every cash transaction, concentrate more power in their hands, and put more money in the hands of government. That is what demonetization is all about.

Up until the demonetization debacle, India actually had the highest GDP growth rate on the planet. And while population growth and inflation factored into that growth, there is no doubt that India’s economy was growing.

That is all at risk, and millions, if not hundreds of millions of people have been plunged into hardship, all because of the decision of one politician far removed from the suffering their decisions cause.

Let this be a reminder of what happens when government – any government – becomes to powerful.

Spencer Fernando

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