Anger has intensified in India as banks struggle to dispense cash following the government’s snap decision to withdraw large-denomination banknotes in what it said was an attempt to uncover billions of dollars in undeclared wealth.
Tempers frayed on Saturday as hundreds of thousands of people queued for hours outside banks for a third day to swap 500 and 1,000 rupee banknotes ($7 and $14) after they were abolished earlier in the week to curb “black money” and to tackle counterfeit currency.
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“It’s absurdity on the part of the government to have announced the demonetisation overnight, as 85 percent of currency is held in 500 and 1,000 rupee denominations,” Prabhat Patnaik, an economist and professor emeritus at Jawaharlal Nehru University, said.
It's absurdity on the part of the government to have announced the demonetisation overnight.
“Government could have given a period of time, say six months to a year, to exchange old notes with new ones – but not abruptly.”
Customers argued and banged on glass doors at a Standard Chartered branch in the capital New Delhi after security guards blocked the entrance.
Nearly half of India’s 202,000 ATMs were not operating on Friday and those that did work quickly ran out of the new notes as scores of people descended upon them.
“It seems utterly ridiculous that no measures were taken to provide currency notes to millions of people across the country before such a big step was taken,” Patnaik told Al Jazeera.
On Saturday, Arun Jaitley, finance minister, said cashpoints had not been adjusted to handle new currency notes prior to the announcement in order to keep it under wraps.
“Recalibration of ATMs will be completed within two weeks,” he added.
Serpentine queues have been seen across the country and part of the delay is because people are required to present proof of identity, even though millions of Indians still lack proper identity cards.
Others turned on Prime Minister Narendra Modi, criticising his ongoing visit to Japan while ordinary people suffered at home.
“He is taking bullet train rides in Japan and here you have old people knocking on bank doors for cash,” said Prabhat Kumar, a college student who said he had spent six hours in the queue.
“He has made a terrible mistake.”
Delhi Chief Minister Arvind Kejriwal, a Modi rival, accused the prime minister of wreaking havoc on poor and working Indians, while the wealthy found ways to skirt the new rules.
“There’s chaos everywhere,” Kejriwal said.
Modi said he would pursue the fight against corruption and tax dodgers, even if it meant scanning decades-old records.
“If unaccounted money is found out during the current clean-up drive, accounts of tax evaders dating back to the country’s independence in 1947 will be checked. If required, I will hire people for this task,” Modi told the Indian community in Kobe, Japan.
He said he recognised that people faced difficulties as the transition to the new series of banknotes takes place, but added that he was confident they would stand by the decision as part of what he called “the war against corruption”.
Much of India’s rural economy is powered by cash transactions, with few people having bank accounts.
The shock decision on Tuesday has left millions of people without cash and threatens to bring much of the cash-driven economy to a halt.
“Withdrawal of purchasing power will lead to contraction of the economy and recession,” Patnaik said, adding: “A lot of small businesses will temporarily shut down and it will be difficult to revive them”.
|The hunt for India’s ‘black money’|
Jaitley, however, said that there could be short-term disruptions to the economy, but this would prove positive in the longer term.
Traders at a Delhi vegetable market said they were considering shutting it down.
“We might have to close down until the situation stabilises,” said Metharam Kriplani, president of the Chambers of Azadpur Fruit and Vegetable Traders.
People in Mumbai said grocers were charging 10 times the price of salt in return for accepting the old cash notes.
In another incident, a newborn reportedly died after a doctor at a local clinic refused treatment because the parents could not pay the bill in banknotes of less than a 500-rupee denomination.
The government has asked people to exchange the old 500 and 1,000 rupee notes by December 30. The country’s central bank in a statement carried by local PTI news agency said printing presses were running at “full capacity” to sustain demand for new notes.
Modi’s move was aimed at shrinking the “black economy”, the term widely used to describe transactions that take place outside formal channels, and which could be as high as 20 percent of gross domestic product, according to investment firm Ambit.
Patnaik, the economist, said there was a complete “misconception around the idea of black money”.
“It is not just holding of notes, black money involves a range of activities that are undeclared and unaccounted for,” he said.
“Normal [legal] businesses also do transactions in cash and they will also be affected by the government’s decision.”