India Markets closed
1 / 8

USSR (1991)

Ramifications went well beyond the economic jolt for it is said to have resulted in the disintegration of the largest nation of USSR. In January 1991 President Mikhail Gorbachev banned large-ruble bills of 50 and 100 to thwart the black economy. They constituted about one third of the money in circulation. People were given just three days to swap their old notes with new ones, post which they could get those replaced only before special commissions. Severe restrictions were imposed on the withdrawal of currency. As a result food, transport and utility prices went haywire – they first tumbled as the cash crunch dampened demand and then rose more than 700 percent in the next four months. Soon enough, the rouble depreciated, per capita income tanked and the economy suffered. This was in part responsible for the breakup of the nation in 1991 with majority of the successor states remaining mired in recession for many years.

Demonetisation: How other nations fared

On November 8 last year, India embarked upon a journey that was both gargantuan in magnitude and unprecedented in scale. Demonetisation sent shockwaves through the country, giving rise to harsh criticism as well as unwavering support, alike. Critics of the move said that India had landed itself in a soup and this would kill the economy; supporters countered that the only ones opposing the move are those who favour black money hoarders.

India is not the only nation to have undertaken this exercise. However, India is the only large economy to have demonetised its high currency notes. Nobody, thus, knows just what the final result of the move will be.

The main motive behind demonetisation was to root out corruption, black-marketeering and terrorist funding: but other nations which went in for demonetisation with similar aims did not end up achieving any of those objectives. If anything, they derailed economic growth and brought down governments.

Here’s a quick look at such nations whose demonetisation move came a cropper and precipitated a political and economic crisis: