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Why Is The Govt Playing Down The Unprecedented Misery Currency Demonetisation Is Bringing About?

People are complaining of not just long queues, but also harassment by crooks in the wake of currency demonetisation. The story for the not so well-to-do, is heart-rending.

10/11/2016 3:08 PM IST | Updated 11/11/2016 3:31 PM IST
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Cathal McNaughton / Reuters

What the government has called short-term "minor inconvenience" is reportedly turning out to be a huge nightmare for many people, especially cash-dependent, low-income families.

On Thursday, numerous reports of long queues and chaotic scenes were reported from streets around the country on the first day that banks opened after the government abruptly announced on Tuesday it will discontinue ₹500 and ₹1,000 notes in a currency demonetisation move.

As ATMs were still shut for a second day in a row, people had to line up in serpentine queues outside bank branches and upon reaching their turn, many were turned away because they ran up the Rs 4,000 limit set for the currency exchange.

In Gurgaon, some private hospitals reportedly began rejecting ₹1,000 and ₹500 currency notes, turning away patients despite instructions from the government that these places have to continue to accept the old notes.

The government's demonetisation move, it claims, is aimed at curbing black money and corruption by bringing more people into the banking system and into the tax net. While that is admittedly a lofty goal, is it necessary that the means to get there have to bring about such immense hardships for the masses?

On Thursday, Finance Minister Arun Jaitley sought to reassure the public that people depositing small amounts won't face any harassment later. But the source of many people's misery isn't just about the taxman but about getting through day-to-day essential needs that go beyond petrol pumps and tolls, places that are supposedly still accepting the old notes.

The closure of ATMs for two straight days also added to the public misery. Take Swapan Mandal, a labourer, who told Reuters he wanted to withdraw ₹3,000 rupees from an ATM and send it to his family in Kolkata who depend on him for survival, but was unable to do so because of the new rule. "I have only 500 rupees notes at home. I don't know if I will be able to send the money," he said.

There were also reports of people charging a premium from people desperate to exchange their old notes for smaller denominations.

However, Jaitley on Wednesday dismissed these reports of people getting into illegal dodgy currency conversion rackets, saying those reports were "exaggerated" and were ultimately against the self interest of the vendors.

Poor Worst Hit

While long queues were just a matter of inconvenience for well-off city dwellers, the move has brought uncertainty and untold misery for low-income families who predominantly depend on cash.

A 55-year old woman in Telangana reportedly committed suicide upon finding out that her money was no longer good. And a 40-year-old washerwoman reportedly died because of shock when she learnt that banks were no longer accepting denominations of ₹1000.

A rikshaw puller in Bihar who regularly sends money to his family of six for their survival needs, was refused by courier guys to take his money. The person had had all his savings in ₹500 to ₹1,000 notes. And a porter struggled to get change for a ₹500 note to divide it up between fellow daily wage labourers, the Scroll reported

In the face of these sordid reports, the government's response to the situation thus far has been sorely lacking in empathy.

When asked about some of the reported hardships being faced by people, Jaitley played them down, saying the government's move ultimately benefits everyone.

"The long-term advantages to the economy are so significant...we would request for people to bear with the relatively minor inconveniences, he said."We will try to minimise those inconveniences."

He suggested that the affected poor families should become part of the country's formal banking system and deposit their cash, which will not only provide them interest income but also ensure the safety of their money.

However, that's a gargantuan task in itself and will likely prove to be a lot harder than the government is admitting at the moment.

It is estimated that the discontinued currency makes up about 85 per cent of all cash in circulation in India, which has stubbornly remained a cash-dominated economy with well over half of its people outside the formal banking sector.

Devangshu Datta writes in the Scroll that over 90 per cent of all transactions in India are currently cash-based. A whopping 300 million people don't even have identification like Aadhaar cards that are needed to open bank accounts.

In addition, numerous small vendors across India aren't equipped yet to handle card transactions. Given that the government and the Reserve Bank had been working on this move for at least six months, couldn't there have been a more humanitarian way to deal with the black money problem and ensure banks were fully prepared?

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