Economy

After the general elections in 2014, a newly ambitious India appeared to emerge: a manufacturing hub with clean cities and villages, where farmer incomes would double and everyone would have houses and bank accounts. Assumed in this vision, though never articulated, was an effective government apparatus converting these ideas into concrete reality.

Cooperative federalism is a governance mantra in India these days. Between GST, Aadhar, demonetization, Swacch Bharat and more, the assertiveness of the Central government in prescribing wide-ranging technocratic policy solutions is at an all-time high. And for good reason—some of these interventions may have long-term benefits, even if they are painful in the short-term. But these benefits are rarely uniform across regions, and the long-term distributional and spatial consequences of these policies are often not well understood.

A momentous task awaits Prime Minister, Narendra Modi and the newly elected Prime Minister of Nepal, Sher Bahadur Deuba. The two prime ministers have to maintain the momentum of the India-Nepal relationship (revived by former Prime Minister, Pushpa Kamal Dahal) and alleviate the bitterness that had crept in during Dahal’s predecessor, Khadga Prasad Sharma Oli’s term. While several reasons can be cited for the plummeting of India-Nepal ties during Oli’s tenure, his accusation of India initiating an economic blockade against Nepal is noteworthy.

In a televised address to the nation on November 8, 2016, Prime Minister Narendra Modi made a spectacular announcement. At the stroke of midnight, rupee notes in the denomination of ₹500 and ₹1,000, corresponding to an estimated 86 percent of all cash (₹15 trillion) in circulation, would cease to be legal tender. Currency holders were asked to exchange or deposit the demonetized notes in the bank by December 30, 2016.