India discontinued 86 percent of its circulated currency — and the poor are in crisis
Millions of individuals and businesses across India are struggling to cope with the financial chaos unleashed three weeks ago when Prime Minister Narendra Modi made the shocking announcement: Starting immediately, the country’s 500- and 1,000-rupee notes, which represented 86 percent of the currency in circulation, would no longer be legal tender.
Anyone holding the notes, which Modi has removed from circulation in an attempt to cripple the country’s widespread corruption and counterfeit currency problem, now has to exchange them at banks for newly minted ones. And they have until Dec. 30 to do it.
Millions now find themselves waiting for hours in serpentine lines outside banks to exchange their defunct currency for the new government-approved notes. Businesses have been crippled, farmers have been unable to buy seeds to plant crops, and people have been denied basic services.
Yamuna Prasad, for one. His 61-year-old mother died of cancer Monday afternoon near New Delhi, but when Prasad’s father, a vegetable seller, attempted to retrieve her body from the hospital, the hospital refused. Officials told him that without new and valid currency to pay the discharge fees, they wouldn’t give him the body.
“My father told them he had no cash,” Prasad told VICE News. Pleading with authorities to make a deal, his father offered to “take the dead body on a cycle rickshaw.” The hospital eventually relented.
Prasad then waited in line at a nearby Bank of India branch where his parents had deposited their life’s savings. He needed cash for cremation, but the bank ran out of cash to disburse. Enraged, Prasad and his family threatened to bring his mother’s body to the bank.
A police officer eventually intervened, giving the family 2,000 rupees; a fellow customer provided an additional 500. The bank later sent the family the 15,000 rupees they were unable to withdraw earlier in the day.
His mother’s body was finally cremated on Wednesday morning.
“It’s a typical case where the underprivileged are paying heavily for the financial misdeeds of the privileged class,” said Ashis Nandy, a renowned Indian political psychologist and sociologist. “They are facing massive inconvenience for the failings of a series of governments to curb black money and allowing corruption to become a way of life.”
In New Delhi’s Chandni Chowk (Moonlit Square), one of India’s oldest and busiest shopping hubs, thousands of shops, vehicles, people, and rickshaws jostle for space with dwindling returns since Modi’s currency change.
“Business is down by 80 percent,” said Sohan Lal Gupta, a locks seller in Chawri Bazaar.
In Delhi’s fruit and vegetable markets, wholesalers worry their goods may rot if they wait for buyers to come up with cash, so they sell at bargain prices.
Since the government’s new policy requires holders of old bills to deposit them in a bank, a huge burden has been placed on India’s poorest. In order to obtain food and other essential items, many are now relying on barter systems.
Others are going to greater extremes, and altering their bodies for cash. Puran Singh lives about 70 miles outside of Delhi. He was so desperate for cash that he took advantage of a government program that offers cash incentives to women and men who submit to sterilization in an attempt to bring down the national fertility rate.
“I have no cash at home to feed my family,” Singh said. “I have not been getting any work owing to the note ban. This way I get some ready money.”
In exchange for the vasectomy, Singh received 2,000 rupees (roughly $30).
India’s 263 million farmers have been hit hard. Many have run out of money to buy seeds for the sowing of winter crops, and experts warn possible crop failures and mounting debt will severely hurt farmers just recovering from two years of drought.
“I have no cash in hand, and I need to buy seeds and fertilizer,” said Ram Bhuwan, a farmer in Rai Ka Purva village in central Uttar Pradesh. “The crop I harvested I had to sell at a discounted price…. We do not have [credit] cards and do not know how to use them.”
According to the Central Bank of India’s most recent data, there are about seven bank branches per 100,000 people in rural areas, which are home to two-thirds of the country’s 1.3 billion people. Many have to travel a long distance to reach banks, losing crucial work hours while waiting in lines to exchange cash.
“Banks and ATMs have little cash; I have lost two days of work trying to get my own hard-earned money,” said Pradeep Kumar, a laborer in Badarpur.
There are some, however, who are actually benefiting from the cash crisis — a further illustration of how starkly the crisis has cut across class lines.
Digital payment systems like Paytm and MobiKwik are thriving. And a mobile service called Book My Chotu — a chotu is an errand runner — allows people in Indian cities to pay someone to stand in line for them at the bank. Yet India currently has only 30 percent smartphone penetration, concentrated among the country’s wealthiest citizens.
“I had to take my mom to the hospital right after the demonetization was announced and needed cash in the form of new currency,” Satjeet Singh Bedi, the company’s founder and CEO, said. “I called one of my helpers to stand in at the banking queue for me. I later realized I could offer these services to my customers.”