When cash lost currency

The government’s shock-and-awe move on November 8 to ban old ₹500 and ₹1,000 notes has dominated headlines across the country since. Meant as an attack on black money and forged currency, the move also resulted in long queues outside banks and ATMs to exchange, withdraw and deposit currency.

We spoke to a cross-section of people to understand what they think of the demonetisation, how they have been impacted and whether the government could have handled this game-changer of a move better.

53-year-old A Somasundaram, Professor of Mechanical Engineering at Kongu Engineering College, Erode, Tamil Nadu, gives the idea a thumbs-up. He says, “It’s a surgical strike with twin objectives. One is the crackdown on anti-social elements that use fake currency; there are already reports that they have been subdued. Next is the controlling of the parallel economy.” Besides, he adds, the move will result in a fall in real estate prices and lower tax rates, which is good for the common man.

The crackdown on black money through the ban on old high-denomination notes finds support among others, too. Pravin Seta, a 62-year old senior citizen from Mumbai, says, “I support this move because it will help a great deal in reducing black money and terror funding.”

Mona Jaydeep Shah, a 53-year old teacher in Mumbai, says it’s a bold move made by the Prime Minister. She says, “I support it because it is going to be beneficial to the country in the long run.” But she adds that while the move will partially achieve its goal of controlling black money, a lot more needs to be done. “Black money hoarders will always find a way around. The government should take more initiatives to encourage the country to go cashless. That way we would be in a better position to combat black money.”

Sixty-one-year-old Vijay Maheshwari who owns a department store, Vijay Shoppy, in Amalner, Jalgaon District, Maharashtra, thinks it’s a good move from a long-term perspective. He says, “For businessmen like us whose dealings have been tax-compliant, it’s a positive because it will now force others to come clean and stop evading taxes. This will make us more competitive and increase our business. The move will also help reduce inflation.” Besides, he says, the move will help address the problem of fake notes, which can cause big losses at small shops that don’t have currency checking machines.

Vijayakumar, 37, a newspaper vendor in Chennai, also supports the move. “It’s a very good move, since black money held in ₹500 and ₹1,000 notes cannot come out now,” he says.

Almost everyone suffered inconvenience due to the cash shortage, but many, at least those relatively well-to-do, think that the pain is manageable, temporary and worth the long-term gain. Some managed with smaller denomination notes, some used plastic money, while others bought on credit. Pravin Seta says, “There were inconveniences but they were minor. At a general store, I had to buy stuff on credit. Also, the ATMs in my locality were not working for a few days. But I had enough cash and debit card and hence I was able to meet my daily expense needs. Also, the chemist shop in my area accepted ₹500 and ₹1,000 notes. That was some relief.” Mona Shah says, “Yes, I did face inconvenience as getting exact tender change was a challenge. However, I used my debit card which eased the situation a little. The inconvenience is temporary.”

Vijay Maheshwari gives the analogy of any big disruptive event causing short-term pain. He says, “People are angry, but this is temporary.” Somasundaram blames poor communication and the media for the panic and fear. He says, “I managed with the ₹100 notes that I had. Smaller transactions using the old notes are still on. Some people are criticising the move citing the pain. It’s true that people, especially the poor such as daily wage earners and those in rural areas are feeling the pinch. But the common man understands this is short term. I think the situation should be back to normal in 10 days.”

His daughter’s wedding is to be held in December. Somasundaram acknowledges he will face some trouble, but is willing to put up with it for the greater good.

The recent move to allow Rs 5 lakh for weddings is a helpful move, he adds.

Some had it quite tough, though. Vijayakumar, for instance, faced a lot of trouble. He explains, “It was tough running the family. Most shops were only accepting ₹100 notes. We buy essentials on a daily basis. So, we had trouble buying stuff like milk, vegetables, etc. Some shopkeepers, to continue business, started selling on credit to people they were familiar with. That’s how we managed. For a week, we had it very difficult since we didn’t have smaller denomination notes. The only option was to exchange the notes standing in the queues at the bank.” On whether he could have used plastic money, Vijayakumar says, “The bank has given me a debit card, but my account generally does not have so much money. We use cash mostly.”

Could the government have handled the whole exercise better? Pravin Seta thinks so. He says, “They should have made proper arrangements for supplying ₹100 notes. The ATMs were closed for two days on November 9 and 10. We expected ATMs to dispense cash from November 11 but it didn’t happen. That was quite disappointing.” Vijayakumar agrees, “Change is tough to get and those with ₹100 notes are not easily letting them out. Only ₹2,000 notes are available at the banks. If the ₹500 notes had been made available early and adequately, this trouble would not have arisen.”

But Mona Shah and Somasundaram think that the government did a fair job. Shah says, “It has been handled well, and it will be effective because it has taken everyone by surprise.” Somasundaram explains, “If secrecy had not been maintained, the bigger goal of striking at black money would not have been achieved.” He adds though, “Calibration of ATMs could have been better.”

Business has suffered due to the move, at least in the short term. Vijayakumar says, “I have to pay cash daily to buy the newspapers. The sudden scrapping of the ₹500 and ₹1,000 notes caused a lot of difficulty, since I didn’t have money to buy papers the next day. I had to compulsorily exchange them at the bank where there were long queues and I was not able to either deposit or withdraw.

I couldn’t collect money from customers as they also had only old notes. I have had to request credit from vendors. I am also requesting customers to pay so that I can continue payments. I hope this problem gets sorted out quickly. If the new ₹500 note is made available soon, the problem will ease.”

Vijay Maheshwari says that business at his department store has reduced by about 40 per cent due to the scrapping of the old notes.

This impact, he thinks, will continue for at least a month. But once the currency circulation improves, business should revive, he says. He also observes that the crowd in malls in Nashik, near Amalner, has reduced by about 50 per cent. On the brighter side, he observes that payments using debit cards and credit cards have increased. To increase the use of cashless transactions, Vijay Maheshwari asks the government to scrap the commission banks charge on payments through cards — this causes a loss of about 2 per cent to merchants and dissuades them from encouraging card payments on big transactions, he says. He also thinks that the government should allow at least one shop, which has a clean record, in every town and village to accept old notes. This will reduce inconvenience to the public, Maheshwari thinks.

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