India scraps its two largest rupee notes in shocking anti-corruption move

[prasen9]

I don't think so. Economic reforms will happen sooner or later.

The polls will tell us if people are seeing "acche din" or it is still a pipedream.

[jayakris]

Are you sure the average citizen supports this? I guess we will get our answers in the polls.

No doubt that the average citizen supports it. I was there for the first 5 days. Will they support it even next month is an entirely different question.

[sameerph]

Which polls are you talking about ? Is it UP/Punjab etc. polls which are due next year ? In that case, there are a whole lot of local issues which work there and overall development may be only one of the factors .

General elections are about 2 and half years away. In that sense, Modi has timed this perfectly in the middle of his term. As per the government reports too, first couple of quarters post demonetisation are likely to see lower GDP growth. The real benefit will be seen after that. So, things will be clearer by 2019 elections. Similar is other big reform of GST. Government is trying to push for early implementation of that so that the good effect on economy can be seen from 2018.

[jayakris]

Anyway, if there is no serious recession or something that starts off due to production grinding to a halt with currency supply problems persisting for more than the next few weeks, I think we will come out fine. After all, the government can print money and push in some extra 4 trillion into the economy soon without inflation worries, to kick start things too (if I understand money economics right!). We will see.

[Atithee]

I'm in India (probably arrived as Jay was leaving). There is no doubt about the common people's support despite the problems. However, the opposition parties are hell bent in opposing it.

[jayakris]

Where in India are you, Atithee?

[RohitG]

From what I see in my state, I have to agree with Sameer. Middle class in general here are supporting this move but it may not necessarily translate in a victory for BJP and nor should this result be used to judge whether people have agreed with this move or not. Urban areas haven't been so affected in my state. Google the reddit stream on this demonetization move where the thread talks about people who have seen their neighbours and family friends who were desperate to get rid of their black money. The opposition and some portions of media have been quite vociferous about this and it has reflected in their coverage. I saw one news channel, actually cut off a part of video (it was so evident) when a guy started supporting this move.

All this being said, it has been a bumpy ride. India is no way a small country, you are replacing 80+% of the currency in a population of 1.3 billion with a very poor ratio of ATMs and engineers to look at it. Also, lot of dealings in the economy were in hard cash, it's only the upper and middle class people who would think about using debit or net banking. For daily wage people who deal in 500s, this has been hard, it will take time to bring them into banks, use the facilities. This decision was a hard one and we need hard decisions at some point or other. Moving to a cashless, more accountable economy will provide a lot of long term benefits. If you want to compete at the international stage, you can't have parallel economies running in your country. I always looked at this as a battle against fake money rather than black money hoarders. I don't want to pass a judgement till 2017. As far as all the problems happening in the ATM lines (and the resulting politicization) I just want to ask, when an old guy falls into the well, do you blame the guy ordered the construction of the well? do you blame the old man? or do you blame the people around him? People like us who can afford to stay without cash for a couple of weeks, should refrain from joining the panic and allow the people who need cash the most to avail it. Lastly, there's no question of rollback for this decision, so the stakeholders involved (the govt itself, the politicians, the banks and the people themselves) should make it a less bumpy experience like for eg. let the old, disabled, pregnant women have separate lines. Political workers and the general populace can also educate the people around them and try to ease the tension.

[suresh]

I need to make cash payments (usually in 100s/500s) to several people to the tune of 6400 per month. This excludes people like the dhobi, LPG and other such vendors who I pay in cash. No 500 rupee notes are available in Tamil Nadu and I have no idea where I can get small change to carry out my routine payments. I am not starving but the people who depend on my payments will if I can't figure out a way to pay them. It is no longer a question of whether or not I am in favour of demonetisation. It is a question of survival for some people. Asking them to move to cashless mode is akin to Mary Antoinette asking people to eat cake when they didn't have bread. Remember that it is now two weeks since the first order was issued. We managed to withdraw 20X100 rupee notes today -- totally insufficient for me as we near the beginning of a new month. Having 2000 rupee notes is not too different from having the older notes!

[Atithee]

Where in India are you, Atithee?

I am in Uttarakhand. Suresh, I don't doubt your troubles, yet I see no sign of helplessness anywhere. Myself included. People are frustrated and even angry, but not desolate. Small business is flourishing as always.

[jayakris]

Lack of Rs 500 bills is the real problem we are facing. Maybe they should have introduced Rs.200 notes, started printing them a while ago (which would not have caused a suspicion of currency demonetization) and had that available to be dispersed. Really, ATM re-calibration wouldn't be as much of an issue if banks could get Rs. 500 notes. Not having any denomination between 100 and 2000 is a huge problem. There just aren't enough Rs. 100 notes out there and I believe Rs. 500 notes are just getting printed (while a lot of Rs. 2000 notes were printed already, I believe). The success or failure of this whole thing will simply depend on how fast Rs. 500 notes reach the population. I just talked to my mother who says things have been okay, except that she has been buying a lot of things like vegetables and fish, foregoing return change, as the sellers don't have change. It's crazy right now, like suresh was saying. People will have to help out and pay extra with Rs 2000 and get the dhobies and LPG sellers to keep accounts and return money when they can. That kind of trust business is not easy in India. But I suppose people will have to get creative in things pretty soon to avoid real issues like starvation in essential goods, if Rs. 500 notes' supply takes too long to pick up. No other choice.

My expectation is that, like Atithee just said, we will not reach desperation. If people remain generally supportive of the reason behind doing this, they will start adjusting things and working on trust pretty soon on payments to each other. It is all unchartered territory for Indians to be community-aware to that extent, but this whole thing has been a new experience for everybody and already we have seen completely unexpected level of cooperation among people (opposition politicians notwithstanding). Perhaps Indians will surprise themselves. Let us hope for the best.

But again, it all underscores what a massive risk the PM took in this. Have to give him credit for having the guts to try. I think people do. Times come in a country's history when you have to do things of such magnitude, to take a next step to improve lives. As a nation, hopefully we will pull it off.

[sameerph]

Yes, people are adjusting a lot. Yesterday, I had to pay Rs. 1000 odd to a plumber and I told him I cannot give him 100 Rs. notes as I did not want to part away 10 precious ones. I asked him to either accept a cheque or take Rs. 2000 new note and give me change. He came around and told me I can given old 500 Rs. notes to my surprise. He will deposit them with his other old notes.

There are other more wealthier folks like family physicians who are giving credit and are saying that you can pay after a few days.

Suresh, you can try to convert some of those whom you have to pay to open bank accounts and accept cheques.

[jayakris]

I don't know if the press/media in India is helping by educating people on ways to get around the currency crunch. I assume not; because social responsibility is not something Indian press/media normally display. They would rather do the easy story on people having trouble, rather than provide solutions. There is probably a need to tell people that they MUST do some of it, or that they could be in trouble soon with cash flow issues. For instance, taking cheques like you said. Indians would do a lot more of things like that, if they feel that it is accepted practice, and that there will be dispute resolution mechanisms etc, I suppose. I don't know what the government can do to set some things up within the next 2-3 weeks, if they know that the Rs. 500 notes' scarcity will remain for much longer. They really must do something, though. I guess it easy for me to say, sitting here in the US. But I hope to see that poor people have a way out in the near future in getting their lives moving, and we shouldn't allow unscrupulous people making use of them with the excuse of not having proper change. We will just have to hope for Indians' survival ingenuity to kick in soon, in helping themselves and each other to manage to be productive enough to survive.

[prasen9]

Like using bitcoin?

[SaniaFan]

He came around and told me I can given old 500 Rs. notes to my surprise. He will deposit them with his other old notes.

Is this not an illegal transaction? Actually many grocery stores are still accepting old notes. I wonder if they can be booked? Or the ones who are giving them? They are using illegal tenders.

[Varma]

...He came around and told me I can given old 500 Rs. notes to my surprise...

How did he spot your stack, Sameer?

- Varma