The high-value rupee ban of November 2016 continues to harm the growing middle class in India.
Many people that relied on either the 500 or 1000 rupee bills for daily living expenses have lost much wealth as India transitions to a digitally-driven, cashless economy.
The Indian government, by direction of Prime Minister Narendra Modi, banned all use of the 500- and 1000-rupee bills throughout the nation beginning November 8, 2016 to solve problems of tax evasion, counterfeit currency and to bring India into the modern era with respect to the electronic transfer of funds.
The currency ban is formally called “demonetization.”
Madeline Jacobson, senior digital cinema major, has close family friends that have been impacted by demonetization.
Jacobson’s parents go to India twice a year to teach rural Christian pastors through the help of their in-country missionary, whom they financially support.
This missionary, along with many others in the nation, has had to resort to bartering for basic goods such as chickens and bread.
“The people I go to see in India are very poor. For example, in an entire rural village, there might be two analog phones, which are those older flip phones. Since the demonetization, to keep living life, they have been trading and bartering,” Jacobson said.
Paul Antony, senior vice president over IT operations at Walmart, a member of JBU’s Engineering Advisory Board, and an Indian native, highlighted how Demonetization affects India’s growing middle class, since the bills in question are frequently used in daily transactions by this part of the population.
“Many people who actually live in that range, where a 500-rupee bill is like a $5 bill, demonetization affects everyday transactions. Most people would literally have wads of cash, whereas if I were to ask you, you probably have everything on your phone or one card. They still carry around a lot of very large notes,” Antony said.
Antony commented on the effectiveness of demonetization, considering the goals with which it was established.
“I think it was a great exercise by the government, but I am not sure that it got them everything they wanted to accomplish. What they found, though, is that there wasn’t that many notes that came back. There was an initial influx, but after that it kind of dropped off. Many people either didn’t have those two bills or they had actually disbursed it somehow. So, I don’t know if it had the same effect as the government expected,” Antony said.
Umashankar Balaraman, community leader at Hindu Association of Northwest Arkansas, was born in India and moved to the U.S. in 1998. He maintains a great relationship with his family and friends in India and visits every other year to India to keep up on the Indian government, culture, and the economy. Balaraman commented on his confidence in the approach of the new Indian government to reform and improve Indian society, which came into office in 2014.
“In 2014, we had a new government [take office]. This government is the very root of those who want to see development to happen in the country. They want to see the country return to the glory we had in the 16th century. It is a big challenge because of the huge population—almost 1.4 billion. This government is doing a lot of infrastructure improvement. One of the biggest ways was the demonetization,” Balaraman said.
“Much of the government corruption money was in 500s and 1000s. In that one night, it made all that money useless. It was a massive stroke and a lot of people lost a lot of money. A lot of people felt like it could have been handled in a much better way. In my opinion, the government really wants to get rid of corruption and improve infrastructure. Their intentions are good, and so I think they will succeed,” Balaraman said.