Towards the end of 2016, India shocked their population by announcing the sudden withdrawal a majority of currency in circulation. On the 14th November, India announced they were scrapping their 500 and 1000 rupee notes – a move affecting +85% of all rupees in circulation.
This blog post will explain that the root for the move and will analyse whether the long run benefits of the moves will achieve their publicly proclaimed benefits.
In India there is a government scheme to encourage the circulation of gold trapped in private hands to help encourage domestic economic growth. It creates a domestic source of capital that did not previously exist and reduces the reliance on temperamental foreign direct investment.
The theory is that the increased circulation of value will encourage capitalist forces to prompt and deepen private investment throughout the economy – instead of the country’s vast private golden wealth sitting idle in inactive private hands.