In­dia ‘cash catas­tro­phe’ prompts chaos

Or­di­nary In­di­ans scram­ble to spend as govt rushes dead­line

Kuwait Times - - BUSINESS -

NEW DELHI:

In­di­ans en­dured more tur­moil yes­ter­day as they rushed to spend old notes at petrol sta­tions be­fore a mid­night dead­line as the op­po­si­tion de­nounced the scrap­ping of high de­nom­i­na­tion bills as a catas­tro­phe.

In­di­ans had been given un­til De­cem­ber 15 to use the old bills at fill­ing sta­tions but the gov­ern­ment rushed for­ward the dead­line on Thurs­day evening, giv­ing peo­ple barely 24 hours to spend their old notes. The sur­prise move sparked up­roar among mil­lions of com­muters who queued out­side fill­ing sta­tion to use their bills while an at­ten­dant said fights had bro­ken out among frus­trated mo­torists.

“This can­not be right. First you say we have un­til De­cem­ber 15 and sud­denly now you are say­ing some­thing else,” said R S Ya­dav as he waited for his turn on a rick­ety two-wheeler in New Delhi.

Prime Min­is­ter Naren­dra Modi un­leashed chaos with his shock an­nounce­ment last month that all 500 ru­pee ($7.30) and 1,000 ru­pee notes-some 86 per­cent of all bills in cir­cu­la­tion-would cease to be le­gal ten­der. The sweep­ing abo­li­tion was meant to bring bil­lions in so-called “black”, or un­de­clared, money back into the for­mal sys­tem, the gov­ern­ment says.

The so-called de­mon­e­ti­za­tion ini­tially won wide­spread ap­proval but the gov­ern­ment has been forced onto the de­fen­sive as frus­tra­tion grows at lim­its on with­draw­ing new ban­knotes.

Cash ac­counts for 90 per­cent of trans­ac­tions in In­dia and the gov­ern­ment has said it would take time be­fore new bills are dis­trib­uted. “I was us­ing my old notes up till now for fill­ing petrol. Now I am dread­ing go­ing to the bank. The gov­ern­ment has no clue what we are be­ing made to go through,” said Sau­rav Mal­lik, who works in the pri­vate sec­tor.

‘Cat­a­strophic ex­per­i­ment’

As anger mounted at the con­tin­ued short­age of cash, the leader of the op­po­si­tion Congress party ac­cused Modi of ex­per­i­ment­ing “with the fi­nan­cial fu­ture of 1.3 bil­lion peo­ple”. In a speech to party sup­port­ers, Rahul Gandhi said “the re­sults of this cat­a­strophic ex­per­i­ment will soon be re­vealed” as a re­port said that there had al­ready been a sharp fall in con­sumer spend­ing.

“Ev­ery econ­o­mist of any re­pute has al­ready con­demned it,” added Gandhi. Some peo­ple have found them­selves queu­ing for many hours to ac­cess their own cash while ATMs have been reg­u­larly run­ning out of notes. Fre­quent rule changes in re­sponse to pres­sure from var­i­ous groups and grow­ing dis­or­der have made mat­ters worse.

Those with old notes are al­lowed to de­posit them into their bank ac­counts un­til year end but long bank queues had prompted many to use them at gas sta­tions. This op­tion has now been cut off.

“I worry that there is go­ing to be more con­fu­sion and chaos in the days ahead,” Saima, who works as an at­ten­dant at a petrol fill­ing sta­tion, told AFP. “Fights have al­ready been break­ing out,” Saima, who uses only one name, added.

Fi­nance Min­is­ter Arun Jait­ley ac­knowl­edged it was in­evitable that the move would re­sult in queues in a coun­try the size of In­dia. “If you are re­plac­ing 86 per­cent of a coun­try’s cash... it is go­ing to be a time con­sum­ing ex­er­cise,” he told a con­fer­ence in Delhi.

But Jait­ley in­sisted the de­ci­sion would ul­ti­mately have a pos­i­tive im­pact as more con­sumers switch to dig­i­tal cur­rency rather than cash. “You will re­duce the quan­tum of pa­per cur­rency and take the coun­try more to­wards fur­ther digi­ti­sa­tion,” he said.

“The short­age of cur­rency it­self is forc­ing this to hap­pen but that’s a de­vel­op­ment which is for the bet­ter.” In­dia’s econ­omy grew 7.3 per­cent dur­ing the last quar­ter, but many econ­o­mists have pre­dicted that the demonetisation will make a big dent in the next set of fig­ures.

A re­port in The Hin­dus­tan Times yes­ter­day said the squeeze was al­ready be­ing felt in many sec­tors of the econ­omy, in­clud­ing a big drop in sales of mo­bile phones, home ap­pli­ances, cars and real es­tate. — AFP

NEW DELHI: In­di­ans wait out­side a bank to with­draw money in New Delhi yes­ter­day. Peo­ple have been forced to stand in long queues to change banned notes and also to take out new cur­rency from their ac­counts af­ter se­vere lim­i­ta­tions were im­posed on with­drawal from banks and ATMs. —AP

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