Demonetisation havoc continues in India as banks run out of currency

Bedlam continued across India on Friday, almost a month after the government demonetised high-value currency notes, as cash-starved banks struggled to service tens of millions of people desperate to withdraw their monthly salaries for December.

Large numbers of people who had queued for hours dispersed disappointed after banks and ATMs ran out of currency to replace 500-rupee (€6.80) and 1,000-rupee notes that had been taken out of circulation on November 8th in a move aimed at countering tax evasion, money laundering, counterfeiting and terrorism.

Many in north India who slept outside banks in freezing conditions woke up in the morning to be told only that no cash had arrived.

“I have been doing the rounds of banks for the past 20 days and have been unable to withdraw my own money,” said Balbir Singh, a junior executive in a private firm in New Delhi. “Even on payday the story was the same: the bank said it simply had no money to disburse, even though I have ample credit in my account.”

The few banks that did have some cash were rationing it out to stretch their resources, resulting in unruly scenes.

Some people who did get lucky ended up receiving new 2,000-rupee notes which they did not want. These are largely useless for buying essentials as shopkeepers in the markets have scarcely any change.

Nervous bankers, fearing violence, demanded police protection as many were heckled and manhandled by distressed customers.

Rules changed

To add to people’s woes, the government has changed the rules 26 times on cash deposits and withdrawals, and on use of the old currency for emergency medical services and buying fuel.

“It [demonetisation] does create disruption, but I do not see this lasting long,” said federal finance minister Arun Jaitley at a public symposium in New Delhi.

Other analysts and experts anticipate that the shortfall of currency notes will not be made up for at least six months, a situation that would adversely affect more than 90 per cent of the millions of India’s unorganised daily-wage workers. Many of them have been laid off following demonetisation.

Economists have predicted a fall in India’s gross domestic product in 2017 of between 0.5 and 2 per cent. And although the government continued to reiterate its “no pain, no gain” mantra, those who had earlier subscribed to that viewpoint were a fast-depleting number.

“There is nothing optimistic regarding demonetisation, only pain and suffering, and with no respite in sight,” said Ram Pal, a daily-wage gardener. “This nightmare seems endless, as I have not been paid for over three weeks.”

Meanwhile, the latest government crackdown, announced on Thursday, was on people possessing gold and jewellery, which many anticipate could be another development with serious ramifications. In a country that is obsessive about gold and is its largest consumer in the world, the government has decreed that married women can possess only 500 grams of gold jewellery, unmarried women 250 grams and men 100 grams.

“This measure will further terrorise ordinary people, turning innocent citizens into criminals, much like what demonetisation has done to a majority of Indians,” said political activist Seema Mustafa.