India’s PM Modi defends cash ban, announces incentives

India's Prime Minister Narendra Modi arrives to launch a digital payment app linked with a nationwide biometric database during the ''DigiDhan'' fair, in New Delhi, India, December 30, 2016. REUTERS/Adnan Abidi

Indian Prime Minister Narendra Modi announced a series of incentives to the poor, farmers, women and small businesses on Saturday in a New Year’s address, and defended his recent decision to abolish high denomination bank notes.

The televised speech was widely seen as an opportunity for Modi to shore up support after a radical move on Nov. 8 to withdraw all 500 and 1,000 rupee bills, accounting for 86 percent of currency in circulation.

Millions of Indians were forced to queue outside banks for hours to deposit old money and withdraw as much new currency as was permitted, causing widespread anger and raising concerns about India’s economic growth in the current quarter.

The so-called “demonetization” was designed to crush India’s huge shadow economy, increase tax revenues and promote the use of bank accounts and digital transactions, but perceptions that the ambitious operation was botched have hurt Modi’s standing.

It comes only weeks before Uttar Pradesh, India’s most populous state with 200 million people, holds an election that will test whether the popular leader has been significantly weakened.

Modi praised Indians for their forbearance.

“In this fight against corruption and black money, it is clear that you would like to walk shoulder to shoulder with us (the government),” Modi said.

“For us in government, this is a blessing … Corruption, black money, and counterfeit notes had become so rampant in India’s social fabric, that even honest people were brought to their knees.”

The prime minister, who swept to power in 2014 on the back of promises to root out graft, said the authorities would continue to stamp it out.

“Serious offences by bank and government officials have come to light. No one will be spared,” he said.


Among the measures announced on Saturday was an offer of a 4 percent discount on interest rates for home loans for up to 900,000 rupees ($13,200) taken out in 2017 by middle-class Indians.