This winter, I went to India for two weeks where I visited family, ate way too much, and witnessed the fabric of India’s economy unravel before my eyes.
During 2016, the American people spoke and elected the most unexperienced candidate available for the leader of the free world, while India’s Prime Minister, Narenda Modi, created a demonetization policy that was implemented overnight. Meaning, Prime Minister Modi told the Indian public that all the current 500 and 1000 rupee notes in circulation would be invalid that night and the only accepted forms of currency after the stroke of midnight are the brand new 500 and 2000 rupee notes. There were also limits put on how much money one can withdraw from a bank account at once and per week, limiting everyone. This action has put the economic safety and typical growth of the sixth largest economy in the world in jeopardy.
Think of it like this: imagine if our leader decided, without any warning, to take all five and ten dollar notes out of circulation. There would be some degree of chaos because people have turned toward using cards. But for India? A mainly cash based society that has a poverty rate of almost 30% of their population and is still considered a third world country? Mutiny. Disaster. Standing in line at the bank for eight or more hours only to find out that the bank has no more cash left.
When the experts say that India is the most cash based society in the world, they are being literal. I have seen first hand the way women and men solely deal in cash. The way everything was payed for in stacks of cash rather than the swipe of a card. The way the poorest of the poor only live on the slight cash they get doing blue collar jobs and cash paying jobs like sales. The way corruption runs rampant. Of course, this leads to a very active black market; in Prime Minister Modi’s eyes, this was the only course of action to stop the corruption and illegitimate cash flow. However, I disagree. I believe it has done more harm than good.
While in India, I travelled throughout Rajasthan, many smaller towns in rural areas, and in bigger cities like Mumbai, and the impact of this policy is apparent. The lines for getting in the bank are impossibly long and even the rickshaw drivers accept phone payment.
In this cash crunch, India has turned to using methods that include paying using your smart phone and debit card. While this allows for regulation, it limits those who cannot afford a smartphone or do not have the knowledge or ability to be financially responsible with a bank account.
An aspect of Indian society that cannot be overlooked, is the vast disparity in wealth. While the wealthy are legitimately rolling in it, the poor cannot afford food, water, or shelter, let alone have enough money to have a bank account or smartphone to pay for their necessities.
The long term positives of this policy can be beneficial as a cashless society is good for the environment and offers a promise for legitimate transparency. However, the methods in which this policy was implemented are questionable, if not illegal. If this policy was put into action slowly over a number of months and years it could be successful. This brings the question, why did Prime Minister Modi want to do it so quickly? Did he really have the best for his people in mind? Or was he looking for major cash opportunities for other reasons?
