We are living in a brave new world here in India. Enough has been written about the “end of cash” and how there will be a day when we will all be using digital money. Well that future has arrived for the one bln plus people of India.
Ever since the demonetization of the Rs. 500 and Rs. 1000 banknotes on the midnight of Oct. 9, 2016, life has turned into a ghastly nightmare for billions of teeming masses. Things that we took for granted have become a challenge, not unequal to climbing the highest of Himalayan peaks. Welcome to cashless chaos, the story of a demonetized India.
Cash starved people are dying
The government’s ambitious plan of getting rid of black money involved monetizing 86 percent of the currency that was in circulation.
They gave the people four hours of notice and at the stroke of midnight on Oct. 9, all the rupee notes in the wallets became mere pieces of paper. The remaining denominations of Rs. 100 and below continued to legal tender.
Now that the banks have reopened, people are finding out that ATMs simply do not work and there is no cash at the tellers either. Many people, especially those that have no access to banks, live in remote parts of the country or are simply too poor and uneducated, are struggling.
India Today reports:
“Huge crowds gathered outside Canara Bank in Delhi's Yamuna Vihar. People continue to face difficulties in paying for household items, essential commodities and vegetables. Serpentine queues were witnessed at banks across India on Thursday as people thronged to exchange their old currency. Some of the banks ran out of cash.”
In the meantime, at least three people have been reported dead.
Huffington Posts Writes: “Three Indians, including one person in Mumbai city and two others in the southern state of Kerala, have died waiting in long queues outside banks, after the Indian government unveiled a surprise policy decision to curb black money.”
Weddings disrupted, hospitals refusing patients
The announcement of demonetization has caught a lot of people in the lurch. Winter is traditionally the time for weddings in India and the wedding season has just started. Many people are finding it hard to deal with restrictions on cash withdrawals, especially when they have to pay caterers, florists and other tradesmen who only accept cash. The daily limit on ATMs has been pegged at Rs. 2000, which is roughly $30 and the weekly withdrawal limit on cash at the teller is Rs. 20,000, which is roughly $300.
The more pressing crisis though is the refusal of privately owned hospitals to accept the scrapped cash.
The government run hospitals have been instructed to accept this money for now but these hospitals are mostly understaffed, unsanitary and often have deplorable conditions. The Hindustan Times reports:
“A spokesperson for Chennai-based Apollo Hospitals said they were not accepting the larger notes. Apollo has 65 hospitals across the country.”
A pointless, expensive exercise
Demonetization has turned into an ugly nightmare from which there is no escape. All the reasons that the government has cited for carrying out this exercise ring hollow.
While they said that this move would get rid of black money, there have been several reports of people having bought gold at premium prices from jewellers across India, just to get rid of their ill-gotten wealth.
The government also said that this move was carried out to thwart counterfeiters, but the Hindu newspaper has broken news that there are no new security features in the newly issued banknotes either. They cite a senior government official as saying: “Since the decision to introduce the new notes was taken only six months ago, there was no time to alter the security features. Only the design has been changed but the security features remain the same as the old notes.”
The cost of this move is being criticized as well.
Mint newspaper analysed the costs of demonetization: “One analysis has pointed out that the total cost of printing the value of Rs 500 and Rs 1,000 notes issued in 2014-15 in the form of Rs 100 notes would be around Rs 11,900 crore. This doesn’t include the costs involved in increased replenishment and maintenance of ATMs, which would be required because of the usage of and withdrawal of smaller-value notes will be far greater.”
We talked with Garga Chatterjee, political commentator from Bengal, who says:
“If fake currency was the intended purpose, it is a ridiculous premise to start with. Less than 0.02 percent of all currency is fake, according to a Lok Sabha statement by Arun Jaitley. If the issue was black money, then the spike in gold prices shows that large volumes of money has moved to this since the announcement. Coupled with the facts that there have been huge 500/1000 denominated cash deposits in West Bengal state BJP account just hours before the announcement and that the government of India has no wish to penalize and recover money from the biggest loan defaulters in India, the whole motive behind this move is suspect.”
Bitcoin may help in uncertain times
The unleashing of this demonetization has plunged India into a crisis from which it would find itself difficult to extricate.
There are already signs that it is not going according to plan, with people having to struggle to get access to money.
While many will turn to digital alternatives like mobile wallets and digital currencies, the truth is that nearly 30 percent of the population of India can’t read and write. These are the people who will suffer the most as cash runs out.
Then there are nearly 233 mln people who do not have bank accounts, these people will struggle as well. In the coming days, we will see uncertainty take centre stage and the country facing a stiffening recession.
In these times, Bitcoin may rescue those who are clever enough to avoid the plunging rupee and the disastrous economic policies of the Modi government, but for a majority of Indians, the coming days will be marked by increased pain.
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