In a special broadcast on 8 November, Prime Minister Narendra Modi declared that in less than four hours, Rs500 and Rs1,000 bills would be demonetized. The timing of this announcement seems obvious, in hindsight. With the massive rollout of the Pradhan Mantri Jan-Dhan Yojana (PMJDY) in India, citizens’ access to bank accounts is nearly complete. This move by the PM has also followed the income disclosure scheme. The next few months will be painful, and should be seen as teething troubles for an economy trying hard to reform its corrupt self. Behaviours change slowly, especially for those set in their ways. Institutional support from financial institutions, telecom platforms and payment interfaces will have to rise to the occasion and fill the supply gap. The effect of this policy is not going to be uniform across the economy. Going less-cash is a fine balance between maintaining ease of financial transactions and curbing malpractices.

(Live Mint)