Rush to spend as India ‘cash catastrophe’ prompts chaos

A bank employee fills a form after counting stacks of old 1000 Indian rupee banknotes inside a bank in Jammu, November 25, 2016. — Reuters pic
A bank employee fills a form after counting stacks of old 1000 Indian rupee banknotes inside a bank in Jammu, November 25, 2016. — Reuters pic

NEW DELHI, Dec 2 — Indians endured more turmoil today 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 yesterday 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 (approx. RM32.40) and 1,000 rupee notes — some 86 per cent 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 demonetisation 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 per cent 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 yearend 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 per cent 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 per cent 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 today 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

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