• Himansu Varghese

Demonetization : A Sociological Outlook

Updated: Aug 1

No Indian will ever forget the evening of November 8th, 2016.

A day before Trump was elected the President of the United States, the Indian Prime Minister Narendra Modi couldn’t help but steal some of the limelight from the global media. A year later, India is still reeling from the effects of the Indian Government’s decision to demonetize notes of large denominations, namely ₹500 and ₹1000 notes.

It barely was a novel idea. Demonetization had been attempted and practiced in many countries around the world before Modi did it. The economic aspects of the move has been debated and counter-questioned a fairly large number of times by panels of world famous economists, as well as the common man.

But there is a stark difference between India’s demonetization and the rest of the world’s. Human instincts dictate that when something that you treasure so much is taken away, you react violently against it. This was the case in nearly all the countries in the world that had take similar decisions. Venezuela, Ghana, Nigeria, Burma, Zimbabwe, Zaire and the Soviet Union had all undergone demonetization. And they all had situations of social chaos, violence, riots, damage to property, deaths. In simple terms, chaos. In Venezuela, thousands took to the streets to protest, hundreds dead, millions of dollar in property damages. Ghana and Zimbabwe lost faith in the banking system and resorted to physical assets and foreign currency. Burma saw one of the first student protests in the world, Gorbachev’s Soviet Union eventually collapsed, and Zaire overthrew its dictator a few years after the demonetization move. Political and social turmoil followed wherever demonetization went.

But not in India.

Indians did not riot. We did not tear down buildings and burn people alive. We were not sent home using tear gas and water guns. Our Prime Minister wasn’t ousted and our democracy didn’t fail. At least not yet.

In short, India did not react like a country that had just gotten 86% of its currency rendered void.

The days following the decision, Indians went to banks, stood hours in the line and exchanged the large notes that we had. We embraced, though with a grim face, the culture of mobile payments. We agreed to shift to an online economic life immediately after the announcement. We barely put up a fight. Now this, as you may have already guessed, is not something that can be studied with charts or graphs of statistical data.

There are no mathematical models yet that can explain why India reacted to the crisis of cash crunch differently from other states that tried it and failed. Because this is not an economic question, but a sociological or psychological one.

Now do we have an answer for it? In my honest opinion, no. Because this is complex study of behavior, and sociology, which could take months, maybe years of research. And to answer it in one article is not just, nor possible. But I do believe that it could be because our history suggests that our culture is not one that puts up much of a fight. We embrace change. Whether that is good or bad is debatable.

In the year that followed, India has switched back to currency as its main source of transactions. The Indian GDP growth rate took a hit of about 1% and we failed to make double digit growth rates. India is no longer the world’s fastest growing large economy. But these are all numbers that hardly provide an insight into the question that we have posed above. Hopefully we will find an answer in the coming years, but until then, Indians will remain docile to change I guess.

Remember, remember the Eighth of November.

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