India’s recent demonetization drive reflects both the government’s vision to transform the Indian economy and the inherent weaknesses that prevent it from successfully doing so. India is composed of many states with regional identities and interests that undermine the national government’s ability to govern. Indian Prime Minister Narendra Modi executed the controversial demonetization measure with the aim of gaining more power in the central government. However, the government must overcome differences among the states in order to consolidate power, thereby making economic reforms possible.
The Indian government demonetized 500-rupee ($7.35) and 1,000-rupee notes knowing that it would harm the economy in the short term.
Modi placed the demonetization within an anti-corruption framework to weaken political opponents and other stakeholders who challenge the government.
Previous demonetization efforts in India have failed. While the most recent effort is bold