The chill from the breeze crawled up my legs and climbed up the stairs of my spine like a spider dancing up a wall. It was 12:30am, and as I opened my phone I realized my legs withstood three hours of standing still and shuffling forward slowly. This was not the only time. In the past two weeks I stood in lines similar to this, sometimes longer sometimes shorter, in front of a machine that was as fickle as most of my life’s decision. And similar to those decisions, the waiting ended when I received what I wanted or when I was forced to leave empty handed. Unfortunately, more often than not, I left the lines leading up the ATM empty ended. There are far too many people and too few bills to satisfy everyone.
The night before the historical elections that left many Americans with a broad range of feelings along the spectrum of “what-just-happened? ”, halfway across the world Prime Minister Narendra Modi rendered the 500 and 1000 rupees notes nullified all across India which similarly left many of its citizens with the same confusing notions of both hope and concern. The India rupee (INR) is the official currency for the Republic of India.
The following day carried out as normal, but questions arose as to what would come next. The reason for the demonetization of the bank notes, as stated by Modi, is to eradicate corruption from the country. Yet, the attempt to purge corruption and curb the investments of illegal groups came with a price that the new bills will never be able pay for.
For myself, the act of demonetization has been nothing but a huge inconvenience. For others, it is the difference to finding a means to pay for medicine, food, and shelter. As I write this, the death toll for standing in lines has reached 120[1]. Most are dying from heart attacks. It’s inconceivable to fathom a person losing a loved one because they were forced to stand in line for 2000 rupees (the maximum amount that people were allowed to withdraw).
Many have the benefit of purchasing the things they need through cashless platforms such as various mobile apps, or bank transfers. Still, there exists portions of society that do not have access to readily available technological resources. How they manage, I do not know.
This is not the first time India devalued its highest forms of currency. Higher notes were also demonetized in January 1946 and again in 1978[2]. Yet, the number of attempts of demonetization have not made the assimilation process easier. Large parts of the rural economy use cash for 80 percent of transactions[3]. From fisherman to rice farmers, many people suffered the unjust consequences of living far from an ATM. Many people lose an entire day of labor to travel and wait for hours to receive money that will only buy them so much time. Many of the people at SAFA, my host organization for the AIF Fellowship, do not have a bank account.
In recent weeks another country, Venezuela, attempted to introduce the demonetization approach as well. Much like India, the President of Venezuela Nicolás Maduro argued that by nullifying the Bolivar it would rid the economy of “mafia” money imposed on by international agencies bent on disrupting the Venezuelan economy[4]. However, due to civil unrest and increase in criminal activities Maduro postponed the decision to January 2 of next year. Comparing these two experiences under similar enactments of forging the economy to resist corruption, I can’t help but wonder if India should have done the same.
It is far too early to start measuring the success of the idea of demonetization. As long as the people wait in line outside as late as 3:00 am, part of the success will be measured by the amount of dispensable income they have in their hands. Only time will tell whether or not the fiscal decision imposed by Modi is a success, and if it truly adhered to the promises made by the Prime Minister that the amount of black money recovered will atone for the amount of hours citizens spent on waiting in earnest for the ATM machines to spit out one more note. Perhaps black money will disappear and India can look forward to both a cashless and more moral economy.
I am not well versed in Economics, just a witness on the ground listening carefully to what my friends and colleagues, and especially the people we work with, shared with me. If you would like to learn more, please click this link https://www.bloomberg.com/gadfly/articles/2016-11-15/no-45-billion-behind-india-s-dry-atms
WARNING: There is math involved. And the dreaded balance sheets. I, like some of you, loathe the thought of deciphering between LIFO and FIFO.
The article explains in depth the reasoning behind demonetization and the effects it can have if it fails to achieve its purpose, as well as the outlying factors that the economic future of India hinges on, such as shifts in political powers or policy in countries where India has strong ties with.
[1] “Venezuela Takes the Demonetization Step, But Forced to Take it Back After Chaos & Death of a Person.” Accessed December 22, 2016. https://thelogicalindian.com/news/venezuela-demonetisation/
[2] “Know All About the History of Indian Currency Demonetization.” Accessed December 22, 2016. https://www.ncaacademy.com/know-all-about-history-of-indian-currency-demonetisation/
[3] “India’s Great Rupee Fail.” Accessed December 22, 2016. https://www.bloomberg.com/view/articles/2016-11-16/india-s-strike-against-black-money-backfires
[4] “Venezuela Takes the Demonetization Step, But Forced to Take it Back After Chaos & Death of a Person.” Accessed December 22, 2016. https://thelogicalindian.com/news/venezuela-demonetisation/
