NEW DELHI — I am outside the Reserve Bank of India building in New Delhi. It's 8 a.m. The bank opens at 9 a.m. but more than 300 people have already queued up here.
Among them is 60-year-old Mohammad Mustaqeem. He runs a garment shop but hasn't been able to open it for the last three days. "There's no business in the market. The only thing for us to do now is to stand in these queues for money because without it we can't even get food."
"The grocer is now refusing credit so we can't get milk, we can't get vegetables and other things. I'm a diabetic but I haven't taken medicine for three days because I can't pay the chemist. Nobody is accepting the old notes," Mastaqeem told me in desperation.
At another bank, 45-year-old Shobha Devi is getting annoyed at the slow pace of withdrawing money. She has been going from bank to bank this morning to get cash and this is the third one. Hopefully, she says, this one will have money.
Since last week, there have been long serpentine queues outside banks, ATMs and post offices across the country. India is reeling from a severe cash crisis following the government's decision to withdraw high-value currency notes from the country's financial system. The government has described the move as a "surgical strike" against "black money," referring to unaccounted for money. The scarcity of cash has thrown daily life in India out of gear.
Millions of people are rushing to change their old currency after the government's decision to withdraw 500 and 1000 rupee notes from circulation. Prime Minister Narendra Modi says the decision is necessary to crack down on corruption.
"There comes a time in the history of a country's development when a need is felt for a strong and decisive step," Modi had said when he announced the decision. "To break the grip of corruption and black money we have decided that the 500 rupee and 1000 rupee currency notes presently in use will no longer be legal tender from midnight tonight. This means that these notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper."
Severe restrictions have been placed on the amount that can be changed and withdrawn from banks at a time. People who have these notes will have until the end of the year to change them at banks and post offices.
Queuing for cash in India — Photo: Bismillah Geelani
Many economists, financial experts and ordinary citizens have lauded Modi for the move.
"This is a historical step, we should all support it because we know that 20 to 40% of our economy was in the parallel or black economy," says Rajiv Kumar of the New Delhi-based Centre for Policy Research. "The fact is that this is like routing out malignancy from your system and that's why you have people after people from the middle class praising Modi because when you have malignancy you are prepared to bear a bit of the pain of the chemo and radiotherapy that you get."
But as a financial crisis deepens, the voices of dissent are growing louder.
"I think with every passing day people are losing patience over the scheme. The sentiment that this is a minor convenience for a greater good is reducing by the day," says journalist Shivam Vij. "The suffering that the people are going through is far from minor inconveniences."
"There have been till yesterday at least 25 deaths because of demonetization. This includes suicides, heart attacks, and elderly people collapsing in queues, that is the kind of suffering. Can you imagine if 25 to 30 people had died in a terrorist attack we would have been asking for a war with Pakistan," he says.
The 500 and 1,000 rupee notes are the most widely used forms of currency accounting for more than 80% of the current cash flow in India.
Jayati Ghosh, a professor of economics at New Delhi's Jawaharlal Nehru University, says the move doesn't address the problem of black money. "Let's first of all recognize that black money is not a stock that people keep under their beds and so on. It's a process, it is transactions. What you have to do is curb transactions that create black money," she said.
"Black marketers don't keep currency, that must be 5 or may be 6% of their total holdings. They buy other assets, they buy gold, they buy foreign exchange, they put their money in foreign accounts, they buy real estate, they do all of those kinds of things."
The opposition parties are also up in arms against the move and have formed a united front to demand a roll back of the measure. The government has rejected the opposition's demand while reassuring people that they will implement swift measures to minimize the hardship people are facing.
See more from Business / Finance here