Across India, patience is rapidly wearing thin.
Last week, the government of India’s Prime Minster Narendra Modi triggered a nationwide scramble for cash, after unexpectedly banning currency notes that account for 86% of all money in circulation. Modi said the move was targeted at tax evaders with large stockpiles of illicit cash, as well as at currency counterfeiters. But nearly a week on, public frustration is growing amid continuing delays in dispensing replacement notes at banks and ATMs.
Saddled with worthless pieces of paper, ordinary Indians are struggling to purchase essential goods. In India’s large informal economy where salaries are often paid out in cash, many are also facing delays in drawing their incomes. For others at the bottom of the economic ladder who survive on daily wages, the Modi government’s move has resulted in the loss of hours of precious work, as they spend their time waiting in long bank queues.
“I support the fight against black money [as illicit cash is known in India],” Ashok Mahto, a Delhi shopkeeper said at the weekend. But he blamed the government for not doing enough to prepare for the rush to exchange the old 500 and 1,000 Rupee notes (worth roughly $7.5 and $15 respectively) that had suddenly been declared illegal at midnight on Nov. 8. As a long queue spilled out of a nearby bank branch and snaked down the road in front of his shop, he said his business had come to a near-standstill, with his customers were left with wallets full of old, now-useless money. “It has become very hard.”
In place of the old currency, the government has introduced a redesigned 500 and a new 2000 Rupee note. Already, the government says banks have received more than $44 billion in deposits in the form of old notes since the policy was announced last week. But withdrawing new currency is proving tough. At ATMs, differences in size mean that as many as 200,000 machines nationwide need to be reconfigured before they can start dispensing the new notes, a process that only began after Modi’s surprise announcement last week. Officials justified the delay on the grounds of secrecy, saying any advance notice would have alerted hoarders of illicit currency and given them time to launder their unaccounted for wealth. The machines that are functioning are fast running out of the smaller denomination notes still in circulation.
Further complicating matters is the fact that millions of Indians live and work without formal banking, operating without accounts and credit or debit cards. Modi’s government, for its part, has tried to change this with a massive financial inclusion drive in recent years that has made it simpler for people to open no-frills bank accounts. But many still remain outside the system, with a 2015 report from the consultancy firm PriceWaterhouseCoopers putting the number of unbanked Indians at around 233 million. Another report from last year, compiled by Tufts University researchers, found that less than 10% of Indians have ever made non-cash payments.
And although India has in recent years become a booming market for new digital forms of payments, access to new cashless technologies remains an issue for many. A recent report by Google and the Boston Consulting Group, published just months before the government’s move last week, said the Indian digital payments industry could be worth as much $500 billion by 2020, contributing 15% to the country’s economic output. But India continues to suffer from a stark digital divide, with nearly a billion people still offline, according to the World Bank. To continue going about their daily lives, they have no choice but to endure long queues to get their hands on the new currency.
As people grow impatient, Modi made an emotional appeal to Indians at the weekend, promising the current problems were only temporary and would help rid India of corruption and unaccounted for wealth. “Cooperate with me and help me for 50 days and I will give you the India you desired,” he said, referring to the end-December deadline for deposits of old notes at bank branches in a speech in coastal Goa state on Sunday, in which he grew teary-eyed. “I know that (some) forces are up against me, they may not let me live, they may ruin me because their loot of 70 years is in trouble, but I am prepared.”