Six weeks ago, when the Indian prime minister Narendra Modi announced the government’s decision to withdraw the banknotes of 500 and 1,000 rupees, not only Indians were shocked. The world leaders, economists and international organizations watched boldly the experiment with a mix of surprise and anxiety. Whether it will work as a means to fight the gray economy and counterfeit currency? So far, the pace of Modi left millions of Indians to fight for the little cash that struck consumption and threaten the growth of gross domestic product (GDP) of India. However, it appears the decision of Modi was only the first of a series of similar steps to end the year at various locations around the world.
On December 14, the Australian Minister for Financial Services and revenue Kelly O’Dwyer said the country examine the issue of a ban on 100-dollar bills, which is the highest banknote in circulation and potentially limit the cash transactions above a certain limit. Like India, Australia wants to fight the shadow economy.
On December 19, the Senate of Pakistan passed a resolution to remove banknotes of 5,000 rupiah, in attempt to limit the black money. The banknotes of 5,000 rupees formed 30% of currency in circulation in the country. The Government of Pakistan is planning to implement demonetization over the next three to five years, as opposed to the accelerated approach of India. The officials explain that the government is not following the ideology of India. However, like India, Pakistan has set itself the task to fight tax evasion and illegal accumulation of wealth.
Earlier, on December 11, Venezuela announced that removes most valuable banknote of 100 Bolivar. The country, which suffers hyper-inflation of 475% this year, gave the citizens a 72-hour window before withdrawing currency, which forms 77% of the money in circulation in the country. The government announced that the old banknotes will be replaced at some point with the new banknotes of 500 and 20,000 Bolivar. South American country believes that cross-border mafia buys Venezuelan bolivars and sell them at a huge profit of Columbia. However, the government was forced to extend the use of banknote 100 Bolivar after a serious shortage of foreign currency led to violent protests and looting.
In the past, countries like Myanmar and Zimbabwe tried their luck with demonetization with alarming results. In India, the move has sparked criticism by some economists, questioning the implementation of the policy of the government and expressing concerns about the lack of infrastructure for cashless future almost entirely dependent on the cash side.