The effects of India’s currency reform? “Chaos” say analysts

The Bloomberg View, titled, “India’s Great Rupee Fail” underlines, “In seafood-mad West Bengal, for example, the fishing industry is in a state of near-collapse; in the wheat-growing states of the northwest, farmers halfway through the sowing season have run out of cash to buy seeds”.

The counter cash exchange will be reduced from Rs. 4,500 to Rs. 2,000 from Friday as per the instructions from the Centre.

Economic Affairs Secretary Shaktikanta Das said there have been reports of “unscrupulous people” who have organized groups of innocent people and sent them from bank to bank to swap old notes.

The government is visibly struggling to print enough notes to replace its withdrawal of 86 per cent of the currency in circulation.

The Financial Times preferred to call it a significant move in Modi’s avowed decision to crackdown on black money, starting with the tracking of large cash transactions, typically done at luxury and jewellery stores. No doubt it has caused a lot of trouble to people, many of whom have to stand outside in long queues for converting useless Rs. 500 notes for 100 ones.

To defeat money issues individuals are confronting, the legislature permitted the utilization of old banknotes to pay court charges and service bills until November 14. “Re-activation of ATMs extends the availability and disbursal of notes for the customers of banks at convenient time and location in judicious mix of higher and lower denominations”. Many of them stored their tax-free cash outside the system, hence the “black money” tag.

So far at least six people have died in the state in incidents related to demonetisation, trade and commerce has been severely affected, social functions like marriages have been hit hard and commoners or daily wage earners are the worst sufferers.

Finance Minister Arun Jaitley said the rush at bank branches has come down significantly today and that there is absolutely no panic.

Plenty of Indians do use cash transactions to hide their wealth and avoid taxes — less than 3 percent of the population pays income taxes — and the authorities occasionally arrest businesspeople or corrupt officials with currency hoards that can fill trucks.

“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.

“There is still the same number of Rs 100 notes in the economy as there were yesterday”.

Credit and debit cards are unaffected, but only half of Indians have bank accounts. In an attempt to carry out the banking process in an orderly fashion in what has become a chaotic environment, the RBI has laid out a Standard Operating Procedure (SOP) for banks and post offices which involves use of indelible ink on the citizens’ fingers. People are told to “stand in line” as a proof of “honor” to the “brave soldiers at the border”.

The government of India took a big step to uncover the black money in the country.

The government also addressed complaints that the quality of the new Rs 2,000 notes is not up to the mark with the colour also coming off them.

“The person so authorised has to go to the bank branch with the specified bank notes, the authority letter given by you and a valid identity proof”, the embassy said.