Birja’s story is typical — and to an outsider, confounding. The 32-year-old works as a housemaid in Delhi and like more than 1 billion Indians has seen her cash evaporate since November last year, when India suddenly recalled its two highest-value banknotes.
“Poor people like me are in trouble,” she said.
Two of her employers have been able to pay her only in expired currency, which needs to be deposited or exchanged at banks. That presents a problem.
Illustration: Mountain People
“I do not have a bank account,” she said.
Nor can the 32-year-old spend hours waiting in the long lines that formed outside banks and automated teller machines (ATMs) the morning after demonetization was announced and linger still.
“If I stand in queue everyone will be angry,” she said of her bosses. “They will count it as my holiday.”
Indian Prime Minister Narendra Modi has implored Indians to allow 50 days for the estimated 22 billion banknotes that were removed from the system on Nov. 8 to be gradually replaced.
That self-imposed deadline ended on Friday last week with the majority of the country’s ATMs still bare and people such as Birja still struggling.
“My husband is an auto-rickshaw driver, who earns 300 rupees (US$4.40) every day after rent,” she said. “But for last seven days he has not earned anything.”
However, the rupee recall might only be the second most extraordinary political phenomenon India has observed in the past seven weeks. The first is that support for Modi’s scheme, especially among those it has hit hardest, appears to be holding — for now.
“I will vote for him again,” Birja said. “He is doing this for poor people. If the ‘black money’ goes from the market, then everybody will have a better life. He works for the people.”
As former chief minister of Gujarat, one of India’s wealthier states, Modi cultivated a reputation as a master administrator.
However, the execution of demonetization — planned in secret, reportedly by a handful of bureaucrats working from Modi’s residence — has been badly botched.
Design changes in the new 500 and 2,000-rupee notes have meant that each of the 220,000 ATMs in India had to be reconfigured one by one.
Even if they could dispense new cash, there is not enough to give: Reprinting the equivalent value of physical notes that were eliminated from India’s economy would take until the middle of next month at least.
Digital payments have reportedly soared, but offer limited relief in a country where 40 percent still lie “outside the ambit of formal banking,” according to government figures.
“The shock has been tremendous and widely spread,” said Anil Bhardwai, the secretary-general of the Federation of Indian Micro and Small & Medium Enterprises.
India’s cash economy is estimated to account for 80 percent of the country’s employment and 45 percent of its GDP.
“That’s where the impact is biggest” Bhardwai said. “Because more and more cash is involved in buying raw materials and paying wages to workers. And of course, your customers are paying for your products in cash.”
Delhi alone has witnessed an exodus of up to 60 percent of the migrant workers who labored for cash in the city’s building sites and factories. In rural areas, villagers have reportedly reverted to bartering or credit.
The expected impact has led economists to reduce India’s growth forecast for the quarter from 7.8 percent, the highest of any major economy in the world, to 6.5 percent.
Worse still for Modi are indications the policy has not unearthed the hoards of black money he promised.
While the operations of some criminal networks, especially human traffickers , appear to have been disrupted, about 90 percent of the canceled notes in circulation have been returned to banks, far more than what the government had estimated.
That suggests either that Indians were hiding less untaxed wealth than first believed, or that the money is being stashed in property or gold instead of cash.
Few democratic leaders could survive such a bungling of their signature policy, especially one that strands virtually every citizen from their money. No reliable polling has been done on Modi’s standing among Indians since the demonetization announcement, but public unrest has been relatively contained, and Indian media outlets have not struggled to find supporters of the scheme, even among those waiting in long bank queues.
The ruling Bharatiya Janata Party has also won several local elections in the country’s western and northern states in the past month, despite the ongoing cash shortages.
“It speaks to Modi’s enormous political capital,” said Prashant Jha, an associate editor of the Hindustan Times.
Halfway through his term, the Indian prime minister’s popularity is still enormous, measured at 81 percent by a Pew poll in September last year.
The policy and its subsequent hardships have also been masterfully framed, Modi biographer Nilanjan Mukhopadhyay said.
“Modi presented the entire idea of demonetization as a highly moral act,” he said.
He recalled how Modi, in his first address after demonetization, appeared to break down before the crowd in Goa, saying he had left behind “my home, my family, everything for the nation” and that “the forces up against me ... may not let me live.”
“He wore a cloak of morality, presenting that he had risen above personal ambitions for the cause of the nation, and inviting Indians to also sacrifice a little bit for the nation,” Mukhopadhyay said. “He asked them to participate in the process of nation-building by standing in queues.”
Demonetization has also been cast as decisive blow against the elites who profit from India’s endemic corruption, a source of deep resentment among the country’s poor and aspirational classes, who are routinely made to pay bribes for basic government services.
“That’s why the majority of the poor are still in favor of this move,” Bhardwai said. “Even while going through the pain, they see it as a leveler, and that at least one powerful political leader has taken a decision that rattles the bigwigs and elites.”
The most resounding judgement of the scheme is to be delivered early this year when elections are held in Uttar Pradesh. As India’s largest state, with a population the size of Brazil, it offers enough seats to secure or scuttle the rest of Modi’s first-term agenda.
One close observer, Sharat Padhin, a veteran political journalist based in the state, suggests Modi might be vindicated.
“In this state demonetization has created a divide between the rich and poor,” he said. “The poorer classes seem to be getting some kind of vicarious pleasure from thinking: ‘I’m facing difficulties by standing in a queue, but the rich people who acquired wealth by dubious means, all their black money is gone.’”
Whether these same people feel the pain was worth it, once money starts flowing again, would decide the fate of India’s seemingly indomitable prime minister.
“Modi has become a larger-than-life leader,” Padhin said. “And he is tied up with demonetization. Everyone down on the street knows that this thing was done by Modi.”
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