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Narendra Modi on Demonetisation

Strong Advocate for Note Ban (strong)

Narendra Modi strongly advocated for the demonetisation of high-value banknotes in 2016, framing it as a necessary structural reform against corruption and the shadow economy. He presented the move as a massive cleaning drive intended to bring unaccounted wealth into the formal economy and curb illegal activities like terrorism financing.

Modi acknowledged the immediate disruption and pain caused by the withdrawal of the ₹500 and ₹1,000 notes but asked citizens to endure this hardship for 50 days for the long-term gain of a cleaner India. He positioned the action as the beginning of a long battle against black money and corruption, aligning with his administration's broader goals of economic transformation.

His stated long-term goals included boosting the economy through the introduction of previously hoarded cash into the active system and accelerating the move towards a cashless society. This policy was also explicitly linked by Modi to efforts to reduce the use of illicit and counterfeit currency.

Context

The demonetisation decision was a major policy move enacted by Narendra Modi's government in 2016 during his first term as Prime Minister. It involved invalidating the ₹500 and ₹1,000 banknotes, making it a significant economic and social event.

This action was taken to directly address black money, corruption, counterfeit currency, and the funding of terrorism, which Modi identified as long-standing afflictions on the Indian economy for 70 years.

Actions Taken

  1. Policy announcement
    Announced the demonetisation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series in an unscheduled televised address.
  2. Stated objective
    Stated the move was intended to curtail the shadow economy, increase cashless transactions, and reduce the use of illicit/counterfeit cash for terrorism.
  3. Policy signal
    Issued warnings that action would follow against benami property as part of the ongoing anti-corruption projects.
  4. Political mobilization
    Rallied BJP MPs who passed a unanimous resolution endorsing demonetisation as a "great crusade" against black money.

Key Quotes

We took the demonetization decision not for some short-term windfall gain, but for a long term structural transformation.

India Today magazine interview December 30, 2016 — Defending the decision to scrap high-value bank notes for long-term benefits.

Maine sirf pachas din mange hai… If we have to struggle for 50 days to punish the corrupt, should we not do it… There is pain due to my decision, but there is more gain… I will stand with you.”

Speech November 14, 2016 — Appealing to people to bear the 'pain' for 50 days to punish the corrupt.

Demonetisation is not the end but the beginning of a “long, deep and constant” battle against black money and corruption...

BJP Parliamentary Party meeting November 22, 2016 — Describing the scope of the anti-black money crusade.

This is a massive swachhata abhiyaan (cleaning drive).

Speech in Kobe, Japan November 12, 2016 — Characterizing the demonetisation of notes as a massive cleaning drive.

Related Positions

  • Goods and Services Tax (GST) The GST, introduced in 2017, was another major tax reform under Modi's tenure, often discussed alongside demonetisation as part of structural economic changes.
  • Digital India programme Modi mentioned the need to promote cashless transactions, which aligns with the broader goals of the Digital India initiative to boost digital literacy and infrastructure.

Criticism

Economists and commentators

The consensus post-event suggested that demonetisation was not the correct approach to target black money and was ultimately unsuccessful.

Opposition parties

Cornered the government over the measure, citing the severe hardships being faced by the masses due to the sudden cash shortages.

Sources5

* This is not an exhaustive list of sources.