In­dia’s cash crunch hits vil­lages, wed­dings in trou­ble

Kuwait Times - - INTERNATIONAL -

In the dusty vil­lage of Dudko, farm­ers and vil­lagers are des­per­ate for new cur­rency notes af­ter the In­dian gov­ern­ment banned 500 and 1,000 ru­pee notes last week in an ef­fort to flush black money out of the econ­omy. Res­i­dents of the sleepy vil­lage, 75 km (45 miles) south­west of the cap­i­tal Delhi, say they are strug­gling to pay for ba­sic goods like food and fuel in the ab­sence of an ef­fec­tive bank­ing and ex­change sys­tem.

Much of In­dia’s ru­ral econ­omy is pow­ered by cash trans­ac­tions with few peo­ple hav­ing bank ac­counts or op­er­at­ing one even if they have an ac­count. Vil­lagers, mostly women, swarmed around the gates of Dudko’s only bank branch on Fri­day to ex­change old and de­funct cur­rency notes for new 2,000 ru­pee notes or the old 100 ru­pee notes still in cir­cu­la­tion. They be­gan to lose pa­tience af­ter be­ing told the new notes had not ar­rived.

“If some­one’s child falls sick, they are not even go­ing to the doc­tor be­cause they do not have the money to pay to the doc­tor, it is a big prob­lem,” Booty Bai, a widow, said as she jos­tled with other cus­tomers to en­ter the bank. Bank of­fi­cials said they were only tak­ing de­posits of old cur­rency notes and did not have fresh notes to of­fer.

Su­nita, whose daugh­ter is get­ting mar­ried in five days, wor­ried she would not have the cash to cover the large ex­penses as­so­ci­ated with an In­dian wed­ding. “My daugh­ter’s wed­ding is on the 16th of this month and we are re­ally wor­ried about how to ar­range the money for such a big oc­ca­sion. Bank of­fi­cials are say­ing that they will give the money on Monday, how will we make our pur­chases?” she said.

The cur­rency move, an­nounced last Tues­day by Prime Min­is­ter Naren­dra Modi, aims to bring bil­lions of dol­lars worth of un­ac­counted wealth into the main­stream econ­omy and curb cor­rup­tion. Crit­ics have warned that or­di­nary peo­ple who do not have ac­cess to the bank­ing sys­tem will be hard­est hit, and that Modi risks up­set­ting his rul­ing party’s sup­port base of small traders and busi­ness­men who largely deal in cash.

De­spite the prob­lems in Dudko, there was strong sup­port for Modi’s move to tar­get black mar­keters and hoard­ers. “This is a very good move by the gov­ern­ment but our con­cern is how long will the cur­rent prob­lem last?,” said vil­lage elder Pra­ha­lad Singh.

In­dia’s “black econ­omy,” a term widely used to de­scribe trans­ac­tions that take place out­side for­mal chan­nels, amounted to around 20 per­cent of gross do­mes­tic prod­uct, ac­cord­ing to in­vest­ment firm Am­bit. New bills of 500 and 2,000 ru­pees have been in­tro­duced from Nov. 10 but it would take two to three weeks to re­place the old notes, Finance Min­is­ter Arun Jait­ley has said.

Chand Singh, a for­mer vil­lage chief, said the short­age of new notes was a small price to pay for the ex­pected long-term ben­e­fits to the econ­omy. “This will put a lid on black mar­ke­teer­ing,” he said. — Reuters

NEW DELHI: An In­dian po­lice of­fi­cer pleads to an el­derly man to stay in the queue as peo­ple crowd out­side banks to de­posit and ex­change dis­con­tin­ued cur­rency notes in New Delhi yes­ter­day. —AP

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