Annie Paul | The demon of demonetization
Demonetization. The word's uncanny similarity to 'demonisation' forebodes the trouble it has brought with it. Before I left for India on December 5, the Indian community in Jamaica was already aflutter, many asking me to carry their 1,000- and 500-rupee notes with me so they could safely be exchanged before the deadline of December 31, 2016, after which they would become obsolete, without any value at all.
In an attempt to catch hoarders of black money, cash earned from illegal activities such as drug and arms running, gambling, prostitution and other untaxable rackets, or just undeclared and untaxed income from property deals and lucrative contracts, what we call money laundering, the Indian government declared on November 8 that it was taking large denomination notes such as the 1,000- and 500-rupee notes out of circulation.
Citizens can deposit old notes into their personal bank accounts till December 31, after which no large-denomination old notes will be recognised. The old 1,000- and 500-rupee notes have been replaced with new 2,000- and 500-rupee notes. The problem is there are too few 500-rupee notes in circulation, so that if you purchase something for 200 rupees and pay with a 2,000-rupee note, no one is willing to give you 1,800 rupees change in precious 100-rupee notes. Smaller currency is suddenly in huge demand.
LONG ATM LINES
Banks are allowed to dispense individual customers 24,000 rupees a week from their accounts, but almost no one is able to access this. The most you might get after queuing up for a few hours is 5,000-6,000 rupees. ATMs allow larger sums to be withdrawn, but you have to withdraw small sums several times till you reach your daily limit. This has resulted in long lines at ATMs with some people reaching the cash dispenser after a few hours in line, only to find that its out of cash.
The situation is quite dire.
"The scourge of the poor" is what my friend Sheri calls the government's note recall. While the claim is being made that demonetization was designed to target money launderers, it is unbanked people selling plots of land to finance their daughters' weddings with the hefty dowries and feasts involved, and women who skimp and save a little money, hiding it from husbands who would drink it away, who are paying the price. Some of them have been so adversely affected that they have committed suicide.
But not everyone feels negatively about Prime Minister Narendra Modi's monetary check-mate. Krishna, the owner of an air-conditioning business in Kochi, loves the move. As one of the 10 per cent of business owners who pays taxes and does everything above board, she has no sympathy for those now forced to regularise their transactions and declare their actual incomes instead of just 40-50 per cent of it.
Conspiracy theories abound. One plausible one is that the war is not on so-called black money, but on cash itself. The Indian government is trying to move the country towards a cashless economy hence the proliferation of e-wallets, the most popular of which is PayTM, a system that allows people to pay for goods and services with e-money after linking their bank accounts to it. The joke is that PayTM stands for Pay to Modi.
SUSPICIOUSLY SOON ACTION
PayTM sprang into service suspiciously soon after demonetization was announced, lending credence to the notion that the ultimate goal of the government is a cashless economy. As one Indian Express article I read said, "Within hours after the November 8 announcement of the Prime Minister, digital payments player PayTM was ready with front-page newspaper advertisements selling its wares and lauding the move." In February, according to the article, a cabinet meeting decided to promote "payments through cards and digital means", "discourage transactions in cash" and "shift the payments ecosystem from cash-dominated to non-cash/less cash payments."
Of course, in a country like India with huge swathes of unbanked rural populations, cashless systems such as these may not help.
Some with accounts are benefiting from a brisk demand for proxies by those who had large sums of the demonetized notes secreted away. Such people are asking their drivers, servants, family retainers and others to deposit sums of money for them, sometimes, but not always, offering 10 per cent as compensation.
Perhaps the most compelling conspiracy theory is the one that suggests that the whole demonetization exercise is designed to starve opposition parties of cash, just as five Indian states, among them the populous state of Uttar Pradesh, get ready to hold elections around the end of January. In the meantime, trying to go cashless in a cash-intensive economy is a balancing act of no mean proportions.
- Annie Paul is a writer and critic based at the University of the West Indies and author of the blog, Active Voice (anniepaul.net). Email feedback to email@example.com or tweet @anniepaul.