Last week saw the Indian government take what seemed to a be a completely surprising decision — the instant removal of all notes of 500, 1000, the two highest denominations which make up 86% of the total currency in circulation. The move was framed as a decisive “surgical strike” against those who have accumulated black money (income illegally obtained or not declared for tax purposes) and against the proliferation of fake currency that’s been sent into circulation for nefarious purposes by forces both external and internal.
On the surface, barring a few exceptions, this was greeted with widespread celebration and joy from many on social media. People made clever puns, took pride in their nation, celebrated their supreme leader who did all this and rejoiced at a nation finally moving forward to the future with a move that had never been done before. Sounds great doesn’t it?
Not so much for the few exceptions who felt the move had not been thought through — both from an impact and from an execution perspective. There were concerns that, blinded by our privilege, we were ignoring what happens to the millions who don’t have access to proper banking, leave alone bank accounts, and the many who don’t have the required identification cards required to make the deposits. There were concerns that, if the move was to prevent counterfeit or black money, then the introduction of the larger denomination note didn’t make as much sense. As a designer, I have concerns about the look and design of these notes (just look at them below) but that’s a less of an issue.
Social Media Disagreed
Most of these concerns were dismissed by people on social media as either forced criticism (due to my political leanings being openly in opposition to the ruling party) or minor, temporary inconveniences for the greater good — to end black money, fake currency, reduce inflation, reduce terrorism, save the economy and in turn help the poor (and much more).
I was told I’m over-estimating the many who might be affected and frequently told “everyone I know has bank accounts and IDs” or the more aggressive “good! then this will force them to open an account or get an ID and get their money in place” or the completely detached “they can easily go cashless with all these apps”. I was also told I should not oppose everything the supreme leader does and it’s better to have some action instead of extended, inclusive deliberation. I was told that this was merely a minor short term inconvenience for major long term gains. There was also this sentiment that there aren’t many people who would be affected and that I should go look up how many Jan Dhan bank accounts were opened and understand the statistics. So I did.
The Numbers Tell a Grim Tale
I decided to objectively look into the below statistics to see if I was indeed overreacting and that everything would be fine as many on social media said it would.
- Access to financial institutions — banking, post office etc
- Jan Dhan Yojana Accounts
The numbers I found were interesting, but sadly the picture they painted was worse than I had feared.
40% of India’s over 1.2 billion strong population, does NOT have access to formal banking (ie. they have no bank account). This is by the government’s own admittance in their press release about setting up the IPPB to help these 40%. Before you get excited about a crisis for the masses being averted with good planning, let me add that this will only begin to be functional after September 2017 (if all goes as planned). So to spell it out for those in the back, nearly 500 million people do not have access to formal banking through which they can deposit any money that’s in the demonetized currency.
This is despite the existence of 241 million Jan Dhan Yojana Accounts which was a scheme set up with best intentions (I’m assuming). However, 24% of these accounts have zero balance and are for all intents and purposes, inactive. In addition, a sizeable portion of those that don’t have a zero balance, are manipulated by the Re. 1 trick and hence have an arbitrarily low number to seemingly just provide the perception of increased adoption and use. It is a good idea to find ways to provide accounts for those who have none, but without the infrastructure and access to back it up, it will remain a half baked measure. For now, there’s ample evidence to suggest that millions do not have access to formal banking. Even if you use the tenuous argument that certainly someone in the “household” has an account, even if it is zero balance and inactive, you’d still be ignoring millions.
Pray for Those Who Can’t Access an Account
There is a mechanism for those who want to go and get the money exchanged without possessing an account. You can take the currency to the bank and get it exchanged. However, this move is possible just once (unless the RBI interim review offers the opportunity again) between now and the 31st of December and for not more than Rs. 4000 in currency. To do this exchange, they require an identity card and that isn’t something that everyone has either.
As per the UIDAI, roughly 1.07 billion people have Aadhar cards, which is very promising and higher than I thought it would be. However, this still leaves millions of people (our population is close to 1.3b) without the ID that’s used for getting old currency notes exchanged. If you don’t know anyone who has no ID to go to the post office or bank to get their notes change, I suggest taking a look at this facebook album that’s inspired by this eye opening series of tweets, that starts with the one below by AmbaAzaad
Having an Account isn’t Enough Either
If we temporarily set aside the millions who don’t have banking access, there is certainly clear that a reasonable majority of households do have a bank account. Furthermore, urban areas have a relatively reasonable banking infrastructure with a reasonable amount of bank branches and ATMs to support the population in these areas. Things should be straight forward, at least for urban citizens, to deposit money in their accounts and eventually convert it. That should mean that the problem is solved at least for them right?
If you’ve spent any time at all in the lines outside ATMs and bank branches, you may be somewhat inclined to disagree. If you haven’t yet experienced that (or were able to send someone to do it for you), consider yourself lucky. People are spending hours, hopping from branch to branch, in desperate need of liquid cash while banks are running out of the currency that’s trickling down to them. Some banks have started offering certain comforts to ease the wait like providing chairs to wait in line and providing beverages to those who are waiting, but these just in a few locations that are lucky enough to have it.
The ATM issue isn’t going away anytime soon either, given that the new notes are different in physical dimensions to the outgoing ones and to accommodate them, each ATM in the country will have to be re-calibrated manually, on location (And that’s assuming that the existing currency storage containers work for the new note sizes). These struggles are bad, but many have it worse.
The Average Citizen is Suffering
The stories about the struggles in getting monetarily acceptable cash are horrifying. People are having to go hungry because they don’t have enough legal cash to get meals. There are reports of people are actually dying either in shock at their money suddenly becoming worthless or while waiting in these lines. In some locations, fights have broken out between citizens and also with bankers (who are facing the fury caused by the government’s decision).
There are examples after examples of how people are suffering because of how inextricable cash is in their every day lives — Daily wage labourers, street vendors, wholesale markets, people going to fill up fuel, people desperately needing medical care in hospitals, people who have withdrawn cash to keep on hand for big personal expenses like weddings and the list goes on. There are already instances of provisions being hoarded and a couple of isolated incidents of looting of stores. Add in the likelihood of a potential strike from truck drivers across the country, whose entire lifestyle revolves around cash and things could get far worse.
A Cashless World isn’t the Answer (Yet)
In the face of all this, it is easy for anyone to say, “Oh! this is the perfect incentive for the masses to go towards a cashless”, promote using online services and signing up for something like PayTM (coincidentally, a company that’s benefiting immensely and somehow had the foresight to post a full front page ad the next day to praise the supreme leader’s secret move). Yes, it is an ideal future and one we should strive for but we’re simply not ready for it. Not from the perspective of infrastructure, nor from the perspective of how people think about money.
I will touch on the awfully privileged nature of that argument a little later, but let me just give you one example of someone I know personally. This person earns a living as a gardener, has a bank account, has a debit card and a decent mobile phone. Surely, something like PayTM is the next step? On the contrary, the debit card goes unused and isn’t even used at an ATM because, as someone who didn’t do much schooling, he is unable to read what’s on the ATM screen and thinks it is too complex to use. Any banking that he does, he does with help from friends or his son who is going to school in 5th grade.
This is one example but think of the millions more like this. Our national literacy rate is 74% and the definition of literacy is poor to the extent where, in some places, one is considered literate if they can sign their name. What happens to all these people? How do you sell them a cashless dream when cash is all they know? Additionally, literacy is just one aspect of it, financial literacy is far lower (as is access to the technology that allows a cashless economy to thrive). These people won’t be happily embracing a policy that they can neither understand nor have access to anytime soon.
A Policy of Politics
If you do look at social media though, you see frequent calls for praise and related hyperbole about this being a first, decisive move. This notion that the policy should be praised for its first of a kind, proactive nature without worrying about those affected by it seems to have come from a place of convenient amnesia. Demonetization has happened before, and for the same reasons. It happened in 1978, when denominations of 1,000, 5,000 and 10,000 were all scrapped with a similar goal, of curbing the “black money” economy. Fortunately, back then we were still very much an under-developed economy and for the masses, these notes were inaccessible and their removal had little impact on them. Nearly 40 years on, it looks like it had little impact on black money too.
Additionally, there’s an amusing notion of forgetfulness or hypocrisy (not sure which is worse) from the last partial demonetization that happened just 2 years ago. The RBI, in 2014, phased out currency issued prior to 2005 due to older notes having lesser security features. This was done in a fashion that, at least to my privileged world, was completely seamless and I was completely unaware of the move until I looked it up while writing this piece. The old notes continued to be legal tender and banks worked towards exchanging them.
Given the current ruling party and its followers trying so desperately to extol the virtues of the recent move, you would expect them to have welcomed it back then. You would be wrong though, as they had the foresight to identify all the problems that this current move would cause and strongly opposed it. They made the very same, valid arguments I’m making here — lack of bank accounts, lack of accessibility to banking, illiteracy etc. They were also explicit in declaring that this was merely to distract from the “black money” issue rather than solving it and reiterated the impact it would have on the common man (and the lack of it on black money). They even had the sense to suggest that there be an inquiry into the potential impact, before it was implemented. All I can say is that it is unfortunate that such sensible thinking evaporated when they came to power and they have pushed through a move that is immeasurably worse than the one they opposed.
This Won’t Stop Black Money
When the move was first announced and the new currency details came out, there was a spectacular web of misinformation that emerged from influential, pro-ruling party sources whether on social media or television. Incredibly inventive dreams of embedded GPS chips in notes that evolved into “e-Ink printed notes which when stacked form a tracker” were all complete nonsense and figments of someone’s hyperactive imagination. The sad thing is, there are thousands of educated Indians (including the media and others who are faculty at our nation’s premier institutions) who believe this to be true and that is a worrying sign about the future of our nation.
In reality, the new notes have ZERO new security features compared to the old ones that are being removed. So essentially, fake notes, one of the concerns supposedly being solved by this move, are simply temporarily disrupted (good, but in the long run I’d assume it simply gets replaced). In addition, there are even plans to reintroduce the 1000, in a newly designed avatar in the not so distant future which makes me question the very purpose of this exercise. I also can’t help but feel that the unanimous praise from industrialists and celebrities, especially those named in things like the Panama papers, is quite telling. If the current notes were banned to make hoarding more difficult AND the rich are celebrating, I’m not sure how exactly bringing in new designs and a higher denomination is meant to stop black money?
To understand this, I looked for more statistics around taxation and found that in terms of tax filings, just 28.7 million individuals filed tax returns in 2012/13 as per government data (it is the most recent year for which data was released). Of this 16.2 million did not pay any tax (due to their income bracket), leaving just 1% of the country as paying any taxes at all. The ones with actual black money, they’re likely smart enough to already be completely unaffected by this if they’ve invested in things like gold, property, foreign currency or have it stashed abroad. In addition, for those whose minds conjure up sacks of money in a store room or money stacked under a mattress, the new 2000 makes it easier to do this in time doesn’t it?
So what about the remaining 99% of those non tax paying, black money swindling, criminals? Now would be the appropriate time to mention a harsh reality — India’s per capita income is around 93,000 Indian Rupees per year. The average Indian earns less than 8000 rupees a month. These are the ones who are suffering and I don’t know how much longer they’ll have to endure it and what will happen if they’re pushed too far.
Our Privilege Makes us Blind
At this point, I can safely assume that you’re reading this online, whether on your computer or possibly, on your phone. If you’re doing so, you should consider yourself to be a part of the elite of our nation — Where you can quickly jump into an online transaction world and avoid a lot of these minor inconveniences listed above.
Having that level of privilege, unfortunately, makes a great many among us blind to the reality of those who lack it. Many I’ve interacted with on this issue are simply unable to fathom the fears and concerns of the many or they show a superficial concern and dismiss it as “short term inconvenience for long term gain”. I find it incredibly callous to dismiss these struggles as a short term inconvenience.
It is awful how people pretend that it’s OK for the poor to put up with the pain for the greater good of the nation, even more so, when the greater good isn’t even looking likely for a variety of reasons. It is nauseating when people present the false equivalence arguments around queuing for something like a cricket match by choice vs being forced to queue because most of the money in your pocket is suddenly invalid.
We need to become very aware of how privileged we are and we need to acknowledge that these are genuine questions going through the minds of millions.
- WHAT? Does all my cash have zero value now?
- I’ve been to 6 different banks, waited in line for 2 hours at each one and I still don’t have money. I haven’t eaten all day and I don’t have a debit card. What do I do?
- My child is seriously ill, but the hospital won’t take my money. I can’t wait to go find money, they aren’t happy with a cheque payment. How can I get my child treated?
- How do I feed my family tonight if I can’t get change for 500? How do I feed myself?
- I have saved 50,000 to build a house for my parents in my village. I’ve collected this money over time and sent it to my parents to keep it safe. Their nearest branch is 20km away. Am I going to lose it all?
- This contractor paid my brother and me for the day’s labour with 1000 note. We can’t use this anywhere; but this is all we have. What do we do?
- I’ve been withdrawing money daily to pay for my sister’s wedding. All that money is worthless now. How do I make payments? Will her marriage stop?
- I’ve saved up money for years, without telling my husband who is dominating, believes he controls everything and handles all the money. How do I get my money changed?
(At least three of these points above, are based on very real and ongoing situations that I’m personally aware of)
What can we do now?
These are grim times in the face of what seems more and more a senseless move. We need to find ways to help those without access to banking as much as we can until the situation improves and there’s a sufficient supply of currency (And currency size compatible ATM machines) rather than the current farce. (One example could be to use services like Big Basket to get provisions for anyone who is struggling with getting cash or getting old currency changed)
Beyond that, we can only hope that things don’t get any worse in the aftermath to Modi Antoinette going “Let them go cashless”.
Even if it is after all, just a minor inconvenience.
For the sake of length, I haven’t touched on
- genuine concerns around the first time use of Hindi numerals the currency
- the plight of tourists who can’t get money changed
- the stories of the ruling party selectively leaking the “secrecy” of their plan to give their friends and allies a heads up to prepare
- the exploitation by some people taking the demonetized notes at a much lower value and taking advantage of desperation
- the theories of crony capitalism around providing a cash influx to banks with bad loans.
Needless to say, there are a LOT of problems with this.You just need to look around.