On November 8, 2016, the Indian government undertook a drastic policy decision, choosing to ban high value currency notes in circulation. Overnight, 86% of India’s currency became worthless, throwing live and livelihoods in disarray.

Now new research is pointing to the widespread impact this dislocation might have had on human development. A new paper by economists Jean Drèze, Aashish Gupta, Sai Ankit Parashar and Kanika Sharma finds evidence of “slowdown, pauses, and reversals in infant mortality decline in large parts of India in 2017 and 2018”.

Given that till 2016, India had been clocking impressive declines in infant mortality, the researchers argue that the sudden setback was probably due to demonetisation.

A sudden hit

Infant mortality rate measures the number of children who die before their first birthday out of every 1,000 live births. It is one of the most fundamental measures of human development.

While India’s infant mortality rate is one of the highest in the world, the figure has seen a rapid decrease from 2005 to 2016. “Between 2005 and 2016, the annual rate of decline in overall IMR (estimated by semi-log regression of IMR on time) was 4.8% per year, compared with 2.1% per year in 1990-2005 and 2.6% per year in 1971-1990,” says the paper.

The researcher identify India’s rapid economic growth as well as welfare schemes for this success.

However, this decline hits a significant speed bump in 2016.

Breaking the fifteen-year trend, the pace of decline in infant mortality slows down sharply for 2017 and 2018. Compared to 4.8% for 2005-’2016, the all-India infant mortality rate declined by only 2.9% in 2017 and 3.1% in 2018.

Matters becomes even more worrying if we take a deeper dive into the data.

The decline in infant mortality faltered in eight out of 20 of India’s big states in 2017 – it plateaued in Jharkhand, Kerala, Madhya Pradesh, Maharashtra, Punjab, Assam and Gujarat while it saw an increase in Karnataka. In 2018, the infant mortality rate plateaued in two states and increased in four: Chhattisgarh, Jharkhand, Madhya Pradesh and Uttar Pradesh.

This setback in the progress of child health, argues, the paper is unprecedented in India’s recent past. “While faltering in a specific state and year is not usual (as can be seen from the occasional “wobbling” of IMR in these figures), there is no precedent of such widespread faltering in the recent past, even in a single year,” the researchers point out. “To find another year where IMR faltered in at least 6 states, or where it increased in at least 4 states, we have to go back to 2006 and 2005 respectively. In the intervening period, IMR faltered in just one or two states (if any) in most years.”

To make matters worse, this breakdown happened in India’s high population centres: the states where overall infant mortality rate faltered in 2017 or 2018 constitute 56.4% of India’s population.

The way this breakdown progressed was that it first affected India’s urban centres. It then progressed to rural India. “In 2017, reversals of infant mortality decline at the state level were largely confined to urban areas, but in 2018 similar reversals also happened in rural areas in several states,” explains the paper.

Clearly, something went wrong in 2016. And this reversal in infant mortality decline isn’t the only data that leads us to this inference. The paper points out that National Sample Survey data for 2017-’18 suggests an unprecedented decline in real per-capita expenditure compared with 2011-’12. More: there is a near stagnation of real wages in rural areas between 2014-’15 and 2018-’19, even when they were rising sharply in the preceding decade.

Much of this distress, argues the paper, did not get captured in India’s official GDP measurements – already under “considerable suspicion”.

So what happened in 2016, to effect this sudden change in India’s human development trajectory? The paper points to the Modi’s government shock demonetisation move: “One plausible hypothesis is that these setbacks are at least partly attributable to India’s startling experiment with wholesale demonetization in November 2016, when 86% of the currency became worthless overnight.”

To further back this up, this faltering in the infant mortality rate decline happened at a time of sustained improvements in household access to sanitation and clean fuel.

The paper ends by pointing to the grim fact that while India’s efforts at child health might have bounced back as the country recovered from demonetisation, it then faced another setback: the harsh and unplanned Covid-19 lockdown. “The national lock- down in April-May 2020 led to mass unemployment and a major disruption of public services, including routine health services such as antenatal care and child immunisation,” the researchers say.