The Effects of India’s Currency Reform? “Chaos” Say Analysts

Prime Minister Narendra Modi had announced the demonetisation policy on November eight. Deutsche Bank AG predicts the crunch could easily shave off a half-point from India’s growth in October-December, which could imperil its position as the world’s fastest-growing major market. Since then, widespread confusion has gripped the country, as people queue for hours at banks, post offices and ATMs to exchange, withdraw and deposit cash. There are no signs of the queues getting shorter according to local media reports. Over a hundred people were booked for pelting stones and clashing with the employees of a bank in Sujru village in Uttar Pradesh over exchanging of old currency notes. The cap has been lowered to 2,000 rupees from 4,500 rupees, Economic Affairs Secretary Shaktikanta Das told reporters on Thursday.

The prime minister last week outlawed larger denomination notes in what he called a drive to rein in corruption and a shadow economy. The vast majority of Indians don’t have bank accounts and they rely on being paid cash to meet their daily needs. “So the situation without any Indian money at all was very hard.” said Adrian Burrows, tourist From United Kingdom.

Indian ingenuity is being stretched by Mr Modi’s crackdown on unaccounted money.

Overwhelmed banks had no reliable way to ensure that people didn’t line up a couple of times, so on Tuesday, the government announced that banks would begin using indelible ink to mark the fingers of people swapping scrapped currency notes.

About 25 percent of the business is done by cash and the majority of the cash business has vanished, said Ashok Kumar, who has been trading in fruit for three decades.

11th November: The Finance Ministry extended the deadline for using demonetised notes till November 14.

Local media in Nepal, too, had a field day following the Prachanda-Modi telephonic conversation earlier this week, alleging that the Maoist leader had more than Rs 1 billion in Indian currency sequestered with trusted aides in India – and was anxious about the loss that he stood to suffer. The existence of this parallel system means that a large portion of the economy goes untaxed. Jaitley asked individuals not to hurry to banks instantly and sit tight for a couple days and to lead monetary exchanges utilizing electronic exchanges, checks and credit and debit cards. It came out with new 2,000 rupee notes first, only to issue new 500 rupee banknotes four days later. “Since these people will be back the next morning, the queue will be even longer when we reopen”, the manager said.

“This is only to harass people like us”, said Parveen, a stay-at-home mother whose husband works as a small-time broker for rental properties, but has had no work for the past week.

India also uses indelible ink to mark the fingers of voters after they cast their ballots in elections. Do you think, you can eradicate graft and black money easily? On knowing that the machine was dispensing only the high-value note, the visitors leave the premises in search of those dispensing Rs. 100 notes. These people will be forced to spend time and resources to get their money converted into currency notes of valid denominations. The daily limit on withdrawal from ATMs was increased from the existing Rs 2,000 to Rs 2,500 per day in the recalibrated ATMs.