Prime Minister Narendra Modi abruptly thrust India into chaos last Tuesday when he banned the 500- and 1,000-rupee bills – the two largest denominations – to root out counterfeits, corruption, terrorism financing and tax evasion. But growing bank lines are becoming more dramatic, laundering inquiries are trending on Google, and the poor are wondering when they’ll benefit as Modi has promised.
“Black money and corruption are the biggest obstacles in eradicating poverty,” Modi said, using the local term for unreported cash, in his address to the nation last Tuesday, according to Reuters.
The ban effectively wiped out 86 percent of the country’s currency on four hours’ notice, even though the 500- and 1,000-rupee notes are only worth about $7.50 and $15 respectively. In a cash economy like India’s, where 90 percent of all transactions are done in cash and largely off the books, retail business has come to a screeching halt.
For the last week, people have been queueing for hours at banks and ATMs to exchange up to 4,500 of the old rupees in cash for new 500- and 2,000-rupee notes. Fights are breaking out, people are fainting and government officials say lines are growing longer because people are visiting multiple banks to skirt the limit.
“To solve this problem, we have decided to use indelible ink marks, similar to elections, at cash counters,” Economic Affairs Secretary Shaktikanta Das announced this morning at a news conference, according to Times of India. “This will start today in major cities.”
While authorities have not placed limits on bank deposits until Dec. 30, any deposits above 250,000 rupees must include proof of taxes paid. Otherwise, the person must pay the full amount of taxes owed plus a fine of 200 percent.
“I am aware you are facing difficulties with 500 and 1,000-rupee notes ban,” Modi said at a political rally, the Guardian reported yesterday. “I am really pained by the inconvenience and that is why I am working tirelessly to help people overcome this situation. I will never let anyone loot money that belongs to India’s poor.”
At the moment, even inconvenient options are limited for the poor. Nearly half of Indians don’t have a bank account, according to the World Bank. Without a bank account, any savings they have for school fees, emergencies or dowries, are cash – now invalid. Many people in rural areas do not even have access to a nearby bank to exchange the banned currency for new bills.
Despite what Modi calls the “temporary hardships,” many Indians seem willing to give the demonetization policy a chance, because they resent the rich for evading their fair share of taxes, according to the BBC.
Official figures released earlier this year indicate that only 1 percent of Indians paid any income tax at all in 2013, and India’s “shadow economy” of black money and assets is estimated to be as much as 20 percent of the entire GDP.
Routine transactions are often off the books, and it’s not uncommon government officials to often invest bribe money in real estate, paying half in black money so the seller only has to declare the other half for taxes.
The finance minister said at a news conference Saturday that the recalibration of India’s estimated 200,000 ATMs will take two to three weeks and asked people to stagger their exchanges.
“I just want my honest citizens to stay patient for 50 days,” said Modi, reported India Today. “Punish me if I do not deliver.”