The pulse | Economy | South Asia
The ban had invalidated 86% of India’s currency without warning, causing hardship for millions of ordinary Indians.
An Indian woman displays discontinued Indian banknotes and a copy of a photo ID as she queues outside the Reserve Bank of India to deposit and exchange them in Ahmedabad, India, on November 17, 2016.
Credit: AP Photo/Ajit Solanki, File
India’s top court said on Monday that the government’s surprise decision in 2016 to demonetise high-value notes was legal and was made after consultation with India’s central bank.
The five-judge constitution court was hearing petitions challenging the coin ban that made 86% of India’s currency invalid without notice. They argued that the move was not a considered government decision and should be struck down by the court.
Four judges from the five-member bank said the government made the decision after consulting with the Reserve Bank of India, saying there were no flaws in the decision-making process.
However, Judge BV Nagarathna issued a dissenting ruling, calling the decision “unlawful” and “an exercise of power, contrary to the law.” She said the coin ban could have been carried out through an Act of Parliament, not by the government.
In November 2016, Prime Minister Narendra Modi made a surprise television announcement that all Rs 500 and Rs 1,000 notes would be immediately withdrawn from circulation. The government defended the decision saying it would dispose of illegally hoarded cash, fight corruption and crack down on money laundering and terrorist financing.
The government finally released new notes worth 500 and 2000 rupees. However, the sudden decision caused losses for small businesses and manufacturers, leading to an economic downturn and months of financial chaos for ordinary, cash-dependent Indians who lined up at banks and ATMs for days as cash poured out. exhausted.
According to the Center for Monitoring the Indian Economy, a Mumbai-based research firm, India lost 3.5 million jobs in the year after demonetization.
The economy took another hit in 2017 when the government replaced a complex system of cascading federal and state taxes with a single tax on goods and services. Many small businesses, the backbone of much of India’s economy, were unable to comply with the new law and went out of business.
India’s main opposition Congress party said Monday the high court decision said nothing about the impact of demonetization and whether its goals were achieved, calling the ban on the coin “a singularly disastrous move.”
“The Supreme Court’s majority verdict deals with the limited issue of the decision-making process, not its outcome,” Jairam Ramesh, a party spokesman, said in a statement.