See More on Facebook

Economics

ATMs run dry in India

ATMs in several cities across the country are running dry bringing back ugly memories of the November 2016 demonetisation.


Written by

Updated: April 19, 2018

Automated Teller Machines (ATMs) have run dry once again in several parts of India, bringing back ugly memories of November 2016, when the Bharatiya Janata Party-led government decided to devalue high-rank currency notes at four hours’ notice.

India’s Finance Minister Arun Jaitly has said the current cash crunch is temporary. The country’s central bank – the Reserve Bank of India (RBI) – in a statement on April 17 contested that there is a cash shortage.

It said a few pockets may have felt the shortage due to logistical issues. The bank said it is stepping up the process of printing bank notes, especially 500-rupee notes, in all its four printing presses and “taking steps to move currency to areas which are witnessing unusually large cash withdrawals”.

However, reports from across the states said there is a shortage of cash at ATMs, with some people claiming the crunch was a result of hoarding. Bankers on condition of anonymity said there has been a unusually high demand for cash, especially in the last two months.     

The 2016 move by Prime Minister Narendra Modi to devalue high-value notes to fight corruption and fraud, check the flow of black money or unaccounted wealth and curb terrorism brought to a standstill the lives of millions of Indians who ran out of cash literally overnight.

The unprecedented cash crunch resulted in serpentine queues outside ATMs across the country – resulting in 33 deaths just in the first week after the scheme was unleashed on unsuspecting citizens. Some died due to shock, others while standing in queue, media reports said.   

Demonetisation and the Black Economy

While Modi believed his masterstroke of derecognising 86 per cent of currency would boost the Indian economy, business pundits have refused to buy this argument – not then, and surely not now.

Yashwant Sinha, a former finance minister, has gone on record to say that demonetisation failed to achieve even a single one of the objectives listed by the government on November 8, 2016.

Deepak Nayyar, professor of economics at the prestigious Jawaharlal Nehru University, believes the economic reasoning behind the decision was flawed and the main objective was political.

Arun Kumar, an expert on black economy, points out that the negative impacts of demonetisation on the unorganised sector and the rural economy in particular are so severe that even future generations will suffer. In his book “Demonetisation and Black Economy”, Kumar has detailed the futility of this exercise.

He argues that demonetisation failed to destroy black money. “One, very little of black money is held in the form of cash, so demonetisation was not going to destroy much of the unaccounted wealth. Two, even if the government did want to track down unaccounted cash, demonetisation itself was not the best way to go about it since it hurt the entire population while trying to ensnare a small number of holders of illicit cash,” he writes.

Kumar’s suggestion is that a better alternative would have been to collect, analyse and follow up on information on large cash withdrawals from banks and thereby identify possible flows of unaccounted wealth.

He says if the government was keen on demonetisation, it could have explored “other less destructive options”.

In August 2017, the RBI’s annual report which stated almost 99 per cent of banned currency notes had been deposited back in banks put the government in a tight spot as it nullified the massive exercise. Tax evaders managed to legalise their black money by using proxies for deposits and making their cash valid.

The World Bank, in its latest report released this week, also acknowledges the disruptions from demonetisation and the implementation of the Goods and Services Tax to India’s economy.

However, it says the economy is recovering from the twin effects and has predicted a growth rate of 7.3 percent for India in 2018.



Enjoyed this story? Share it.


Lamat R Hasan
About the Author: Lamat is an Associate Editor at Asia News Network.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Economics

Beijing slams unrest and backs HK govt’s use of lawful means to tackle it

Protests have shut down Hong Kong for the past several days before a government crackdown. Beijing yesterday condemned the unrest that broke out in Hong Kong over the city’s extradition Bill as an organised riot, and said it supported the local government’s use of lawful means to resolve the situation. Asked if the central government supported the use of rubber bullets and tear gas on protesters on Wednesday, Chinese Foreign Ministry spokesman Geng Shuang said that mainstream public opinion in Hong Kong was against any act that undermines the city’s prosperity and stability. “Any civilised and lawful society will not tolerate the destruction of peace and tranquillity,” he said. “The Chinese central government strongly condemns all types of violence and supports the Hong Kong government to handle the matter according to the law.” Chinese state media


By The Straits Times
June 14, 2019

Economics

Vietnam to be among world’s most dynamic markets by 2030

The country has reached amazing levels of progress in the last two decades. With an emerging market economy and continued strong growth, Vietnam is set to become one of the most dynamic markets in the world by 2030, according to Euromonitor International, a global market research company. An Hodgson, Euromonitor International’s income and expenditure research manager, said the company’s research database showed that urbanisation, with the associated concentration of income, wealth and population, would propel Việt Nam’s commercial success by 2030. Published last month, the research database has found that Vietnam will be the third biggest urban market by consumer numbers and fifth biggest by total spending in Southeast Asia. By 2030, the country’s urban consumer market will expand to 46 million consumers and $169 billion worth of spending. GDP growth is expected to rea


By Viet Nam News
June 13, 2019

Economics

Hong Kong protests turn violent

At least 72 people taken to hospital during clashes with police. At least 72 people were injured and taken to hospital during clashes between police and protesters on Wednesday (June 12) over a contentious extradition Bill, said Hong Kong authorities. By night time, police officers were still in a stand-off with protesters on Queensway, not far from Admiralty Station, even though most of the protestors had dispersed following the use of tear gas and rubber bullets. Earlier, police fired rubber bullets at protesters after they declared a “riot” as – for the second time in days – clashes broke out between police and protesters demonstrating against the controversial extradition Bill.


By The Straits Times
June 13, 2019

Economics

Li pledges to improve business climate

Li Keqiang says China taking steps to open up economy to foreign businesses Premier Li Keqiang reaffirmed China’s commitment to improving its business environment by deepening reforms to streamline administration and carrying out large-scale tax cuts and fee reductions. Li said in a meeting on Tuesday with World Bank President David Malpass that the country will bring its business environment more in line with market principles, international standards and the rule of law as part of efforts to promote high-quality development. He noted China’s cooperation with the World Bank, which is in keeping with its steps in reform and opening-up and benefited the country’s growth. The global landscape is complex and fluid, and the Chinese economy is facing various risks and challenges, he said. Further cooperation between China and the World Bank will help promote poverty reduction, narrow


By China Daily
June 12, 2019

Economics

Abe to visit Iran to mediate with U.S.

The Japanese Prime Minister is due in Tehran today. The government is making arrangements for Abe to meet with Iran’s Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani. Abe will encourage the United States and Iran to hold direct dialogue, aiming to mediate the increasing tensions between two countries over their nuclear agreement. It will be the first visit to Iran by an incumbent prime minister in 41 years, since former Prime Minister Takeo Fukuda visited the country in 1978, and the first since the Islamic revolution of 1979. According to government sources, the government is considering having Abe meet with Rouhani on Wendesday and with Khamenei on Thursday. Foreign Minister Taro Kono will visit Teheran on Wednesday before Abe’s arrival and meet with his Iranian counterpart Mohammad Javad Zarif.


By The Japan News
June 12, 2019

Economics

Restrictions on Chinese firms could drive up 5G cost

China is increasing pressure on consumers in a bid to end restriction on its major tech firms. Europe would have to pay an extra 55 billion euros ($62 billion) for 5G networks and suffer an 18-month technology delay if it bans telecom equipment purchases from top Chinese manufacturers, according to an industrial report. The report by the GSM Association, which represents 750 mobile operators worldwide, said Ericsson, Nokia and Samsung, the non-Chinese contenders in the 5G market, do not have the capacity to handle all of the shift from 3G and 4G networks to 5G in Europe while honoring contracts already signed in North America and Asia. Huawei and ZTE account for about 40 percent of the EU market, and Huawei is “currently a pioneer in 5G technology”, according to the GSM analysis, first reported by Reuters and Agence France-Presse on Friday. “A ban on Chinese v


By China Daily
June 11, 2019