The Reserve Bank of India (RBI) has decided to withdraw the Rs 2000 denomination banknotes from circulation. But existing notes will continue to be legal tender, the RBI announced Friday.

• Imposes a burden on citizens, especially those who must convert one currency to another.
• It likely stalls a nation's GDP during the conversion process.
• Incurs expensive administration costs including printing, adjusting ATMs, and marketing the changes.
• Negatively impacts and even stops cash-driven sectors.
• Introduces new types of currency risk such as cybercrime.

5. Demonetization example in India

• Lastly, demonetization has been tried as a tool to modernize a cash-dependent developing economy and to combat corruption and crime (counterfeiting, tax evasion). In 2016, the Indian government decided to demonetize the 500 and 1000 rupee notes, the two biggest denominations in its currency system; these notes accounted for 86% of the country's circulating cash.
• India's Prime Minister Narendra Modi announced to the citizenry on Nov. 8, 2016, that those notes were worthless, effective immediately- and they had until the end of the year to deposit or exchange them for newly introduced 2000 rupee and 500 rupee bills.

6. Why could a country Demonetize?

8. Disadvantages of Demonetization

9. Impact of Demonetization on GDP

OPERATION SMILING BUDHA

1. Context

2. Homi J Bhabha (The man behind India's Nuclear Programme)

• India’s nuclear program can be traced to the work of physicist Homi J Bhaba. In 1945, after Bhaba’s successful lobbying of India’s biggest industrial family, the Tata Institute of Fundamental Research was opened in Bombay.
• TIFR was India’s first research institution dedicated to the study of nuclear physics. 
•  Post-independence, Bhaba repeatedly met and convinced Prime Minister Jawaharlal Nehru about the importance of nuclear energy and the need for India to allocate resources for its development. 
• Thus, in 1954, the Department of Atomic Energy (DAE) was founded, with Bhabha as director.
• While Nehru publicly opposed nuclear weapons, privately, he had given Bhaba a free hand to lay the foundations for both civilian and military uses of nuclear technology.
• Under him, the DEA operated with autonomy and away from significant public scrutiny.

3. The threat of China and Pakistan

• A pivotal moment in India’s nuclear journey came after it suffered a crushing defeat in the 1962 Sino-Indian War and China’s subsequent nuclear bomb test at Lop Nor in 1964.
• Concerned about India’s sovereignty and the looming might of an unfriendly China, the mood in the political establishment towards nuclear weapons was slowly shifting.
• While new Prime Minister Lal Bahadur Shastri first tried to attain nuclear guarantees from established nuclear weapons states, when such guarantees did not emerge, a different route had to be taken. 
• In 1965, Things were further accelerated, India went to war with Pakistan once again, with China openly supporting Pakistan this time Effectively.
• India was surrounded by two unfriendly nations and needed to take steps towards building self-sufficiency.
• However, the path toward obtaining nuclear weapons would not be easy. 

4. The Discriminatory NPT

• By the 1960s, discourse around nuclear disarmament and non-proliferation had shifted to the mainstream as the Cold War arms pushed the US and the USSR to great extremes.
• After China successfully tested its own bomb, there was increasing international consensus among the big powers regarding the need for a nonproliferation treaty. In 1968, the Non-Proliferation Treaty (NPT) came into existence.
• The treaty defines nuclear-weapon states as those that have built and tested a nuclear explosive device before January 1, 1967 – the US, Russia (formerly USSR), the UK, France, and China – and effectively disallows any other state from acquiring nuclear weapons.
• While the treaty has been signed by almost every country in the world, India is one of the few non-signatories. 

5. Pokhran-I and its Aftermath

• By the 1970s, India was capable of conducting a nuclear bomb test. Bhaba’s successor at the DAE, Vikram Sarabhai, had worked to significantly broaden India’s nuclear technology and now the question was more of political will, especially in the context of a global order extremely wary of nuclear proliferation.
• Indira Gandhi took over the country’s reins from Shastri after his sudden death in 1966. Once considered a puppet in the hands of a senior Congress leader, she would soon show her mettle, leading India through another testing war against Pakistan in 1971 and winning an overwhelming mandate in the following elections. 
• On May 18, 1974, with support from Indira, India carried out its first nuclear test at the Pokhran test site.
• Pokhran-I, codenamed Operation Smiling Buddha, would be billed as a peaceful nuclear explosion, with few military implications.
• However, the world was not willing to buy India’s version of the story. There was near universal condemnation and countries like the US and Canada imposed significant international sanctions on India.
• These sanctions would be a major setback for India’s nuclear journey, and majorly decelerate its progress. 

6. Pokhran-II

• After a few years of domestic turmoil when the political will to conduct nuclear testing was wanting, in 1998, the National Democratic Alliance (NDA) led by the BJP came to power under the leadership of Atal Bihari Vajpayee.
• One of the key promises in its manifesto was to “induct nuclear weapons” into India’s arsenal. In March 1998, Pakistan launched the Ghauri missile – built with assistance from China.
• Two months later, India responded with Operation Shakti. While the 1974 tests were ostensibly done for peaceful purposes, the 1998 tests were the culmination of India’s nuclear weaponization process.
• Consequently, the Indian Government declared itself as a state possessing nuclear weapons following Pokhran-II.
• While the tests in 1998 also invited sanctions from some countries (like the US), the condemnation was far from universal like in 1974.
• In the context of India’s fast-growing economy and market potential, India was able to stand its ground and thus cement its status as a dominant nation-state.

7. The Period Between the two nuclear tests

• Beyond international sanctions, India’s nuclear journey was also hobbled by domestic political instability.
• The Emergency of 1975 and Prime Minister Morarji Desai’s opposition to nuclear weapons brought the program to a grinding halt.
• However, clamour for developing nuclear weapons picked up once again in the 1980s, as reports on Pakistan’s rapidly progressing nuclear capabilities emerged.
• In 1983, the Defence Research and Development Organisation’s (DRDO) funding was increased and Dr. APJ Abdul Kalam was put in charge of India’s missile program.
• That year, India also developed capabilities to reprocess plutonium to weapons grade. Furthermore, throughout the decade, India exponentially increased its plutonium stockpiles.
• The early 1990s brought with them increased pressure to quickly develop nuclear weapons. With the fall of the USSR in 1991, India lost one of its biggest military allies, since the time Indira Gandhi had signed a 20-year security pact with it in 1971.
• Furthermore, the US continued to provide military aid to Pakistan despite its own misgivings with its nuclear weapons program.
• Finally, discussions regarding a Comprehensive Test Ban Treaty (CTBT) were also underway in the UN (it would be finalized in 1996, but India did not sign it).
• For India, it felt like its window of opportunity was fast closing. Thus, in 1995, then Prime Minister PV Narasimha Rao permitted the preparations for carrying out a nuclear test in December 1995. However, logistical and political reasons pushed back the tests further.

8. India's Doctrine of Nuclear No-First Use 

• A commitment to not be the first to use a nuclear weapon in a conflict has long been India’s stated policy.
• Pakistan, by contrast, has openly threatened India with the use of nuclear weapons on multiple occasions beginning from the time the two nations were not even acknowledged nuclear powers.
• On January 4, 2003, when Vajpayee was India’s Prime Minister, the Cabinet Committee on Security (CCS) met to review the progress in operationalizing the country’s nuclear doctrine.
• An official release issued that day summarized the decisions that were being put in the public domain. 
• Among the major points in the doctrine was “a posture of No First Use”, which was described as follows: “Nuclear weapons will only be used in retaliation against a nuclear attack on Indian territory or on Indian forces anywhere”. 
• However, the doctrine made it clear that India’s “nuclear retaliation to a first strike will be massive and designed to inflict unacceptable damage”.
• Also, in the event of a major attack against India, or Indian forces anywhere, by biological or chemical weapons, India will retain the option of retaliating with nuclear weapons.

9. Important key takeaways of the doctrine

• Nuclear retaliatory attacks can only be authorized by the civilian political leadership through the Nuclear Command Authority.
• The Nuclear Command Authority comprises a Political Council and an Executive Council. The Political Council is chaired by the Prime Minister.
• India would not use nuclear weapons against non-nuclear weapon states.
• India would continue to put strict controls on the export of nuclear and missile-related materials and technologies, participate in the Fissile Material Cutoff Treaty negotiations, and continue to observe the moratorium on nuclear tests.
• India remains committed to the goal of a nuclear weapons-free world, through global, verifiable, and non-discriminatory nuclear disarmament.