Demonetisation and its Link to Crime in India

On 8 November 2016, the Bharatiya Janata Party (BJP)-led Indian central government effectively rendered approximately 86 percent of the country’s physical cash obsolete by banning the use of the INR 500 and 1,000 notes. The currency ban is a significant step taken by the Indian government towards the fight against tax evasion, terrorist financing, and the smuggling of arms, drugs and contraband into the country. 

The ban has also been viewed as a move against individuals who hold a considerable amount of so-called ‘black money’, money earned through illegal activities and not subject to tax. However, since the implementation of the currency ban, the country has seen widespread protests in almost every state.

Civilians and opposition parties have decried the central government’s financial overhaul, citing impractical operational environments for small businesses, working class communities and those residing in rural areas. However, BJP senior officials have praised the financial reform, specifically citing a decrease in the rates of illegal activities, as the primary argument for their defence of the policy.

These achievements in decreased criminal activities have been touted by several Indian political and police officials who have made statements regarding decreases in crime, attributed to the demonetisation policy. This reported decrease in criminal activity can likely be attributed to the cash intensive nature of India’s economy. For one, the availability of cash provides criminals with a high degree of liquidity for crimes that are financially-motivated. Furthermore, although internet usage in the country is steadily increasing, the vast majority of Indian nationals do not conduct online transactions regularly. The mass currency withdrawal, therefore, provides a stumbling block to financially motivated criminals seeking to extort money from locals.