India to replace largest bank notes: U-M experts can comment

November 9, 2016
Mandira Banerjee


In an effort to tackle counterfeiting India has cancelled two largest denomination bank notes and is replacing it with newly designed ones. University of Michigan experts can comment on the impact of the move:

Puneet Manchanda, professor of marketing at the Ross School of Business, is an expert on business in emerging markets, business in India, and strategy and marketing issues.

“This is a surprising and radical policy to get at the core of one of India’s problems—corruption,” he said. “The positives are that it signals clear intent and action to minimize corruption. The negatives are that it targets low and mid-level corruption, it is less likely that large level corruption is heavy on cash.

“Markets such as real estate are also likely to be slowed due to the lack of liquidity. Thus, it is hard to predict the short term effect, but it can only help in the medium term. In order to make this policy maximally effective, the government should continue to roll out other policies to fuel the fight against corruption.”

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Vikramaditya Khanna, professor at the U-M Law School, is an expert on global corporate and financial law and policy.

“In a surprise major move, Prime Minister Narendra Modi of India has declared that 500 and 1,000 rupee notes will no longer be legally tender,” he said. “This was being undertaken as a way to address concerns with unaccounted-for money and corruption.

“Individuals have until December 30 to deposit their 500 and 1,000 rupee notes into banks and post office accounts, but that brings the cash into the open. How effective this measure will be in addressing corruption and unaccounted-for money will depend in part on whether the most likely methods of evading it are being policed effectively. Time will only tell, but it is a bold move to address a problem that plagued has India for many years now.”

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M.S. Krishnan, associate dean of global initiatives at the Ross School of Business, studies business in India, computer information systems and has led several student projects in India.

“I think this is an excellent move from the Indian government,” he said. “It will address many challenges they face such as unaccounted black money, corruption and fake currency. Over the last several months, government did offer opportunities for citizens to declare their wealth, so it was in the making. In the long run, this will make it much easier and cleaner to do business in India.”

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