In the dusty village of Dudko, farmers and villagers are desperate for new currency notes after the Indian government banned 500 and 1,000 rupee notes last week in an effort to flush black money out of the economy. Residents of the sleepy village, 75 kms southwest of the capital Delhi, say they are struggling to pay for basic goods like food and fuel in the absence of an effective banking and exchange system.
WATCH VIDEO: Big Relief For Farmers, Families Celebrating Weddings: Find Out More
Much of India’s rural economy is powered by cash transactions with few people having bank accounts or operating one even if they have an account. Villagers, mostly women, swarmed around the gates of Dudko’s only bank branch on Friday to exchange old and defunct currency notes for new 2,000 rupee notes or the old 100 rupee notes still in circulation. They began to lose patience after being told the new notes had not arrived.
“If someone’s child falls sick, they are not even going to the doctor because they do not have the money to pay to the doctor, it is a big problem,” Booty Bai, a widow, said as she jostled with other customers to enter the bank. Bank officials said they were only taking deposits of old currency notes and did not have fresh notes to offer.
Sunita, whose daughter is getting married in five days, worried she would not have the cash to cover the large expenses associated with an Indian wedding. “My daughter’s wedding is on the 16th of this month and we are really worried about how to arrange the money for such a big occasion. Bank officials are saying that they will give the money on Monday, how will we make our purchases?” she said.
The currency move, announced last Tuesday by Prime Minister Narendra Modi, aims to bring billions of rupees worth of unaccounted wealth into the mainstream economy and curb corruption. Critics have warned that ordinary people who do not have access to the banking system will be hardest hit, and that Modi risks upsetting his ruling party’s support base of small traders and businessmen who largely deal in cash.
Despite the problems in Dudko, there was strong support for Modi’s move to target black marketers and hoarders. “This is a very good move by the government but our concern is how long will the current problem last?,” said village elder Prahalad Singh.
India’s “black economy,” a term widely used to describe transactions that take place outside formal channels, amounted to around 20 percent of gross domestic product, according to investment firm Ambit. New bills of 500 and 2,000 rupees have been introduced from November 10 but it would take two to three weeks to replace the old notes, Finance Minister Arun Jaitley has said.
Chand Singh, a former village chief, said the shortage of new notes was a small price to pay for the expected longterm benefits to the economy. “This will put a lid on black marketeering,” he said.