It certainly took everyone in India by surprise. But then, Prime Minister Narendra Modi has a flair for the dramatic. In an unexpected primetime address on Tuesday, he announced that in a few hours, millions of high-denomination currency notes would no longer be legal tender. It was the only way, he insisted, to deal with “the disease” of unaccounted-for income — or “black money,” as it’s called in India. “Your money will remain yours,” he assured a stunned citizenry — as long as you get around to depositing it in post offices sometime over the next several weeks.
As with everything the Indian government does, there’s a complex system of exemptions and exceptions to this demonetization. If you’re in an accident, for example, you can still pay the emergency room in 1,000-rupee notes. Also, for some reason, if you want to buy milk. Meanwhile, withdrawals from ATMs have been limited to 2,000 rupees a day for the next few days; returning bills to banks will require some form of government ID; and so on and so forth. Typically for India, a simple enough policy — indeed, one perhaps too simplistic in conception — somehow had enough fine print to confuse people.
Still, once India endures what could be a pretty chaotic transition, will Modi’s big idea work? There are certainly big advantages to going cashless. And black money in India is certainly a huge problem. The Indian economy is as much “informal” as it is formal — meaning that most enterprises…