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Currency reform in India: what you need to know about it. Currency reform in India: Notes from an eyewitness Currency reform in India

A “day of rage” has passed in India: protests against the withdrawal of 500 and 1 thousand rupees banknotes from circulation are growing in the country. The authorities explain the reform as a fight against shadow traders, but, rather, it could deal a blow to the entire economy

People near a bank in the Indian city of Ahmedabad. November 29, 2016 (Photo: Reuters/Pixstream)

Hit the cabinets

A third of the country was lined up at exchange offices, the rest would have stood up too, but there was no money to get to the banks. Taxi drivers are paid in food. Real estate sales, retail trade, construction, trucking all fell sharply, and what will happen to other industries remains to be seen. The rich ask the poor for help. Dozens of people lost their lives.

This week, many people's patience ran out—on Monday, November 28, a “day of rage” was held in major cities. In Kolkata, as reported by Al-Jazeera, 25 thousand people took to the streets, in Mumbai - 6 thousand. This is not much by Indian standards, but considering that the government promised to normalize the situation only by the New Year, protests may still reach more serious level.

Indian Prime Minister Narendra Modi achieved such results on the evening of November 8 that from midnight banknotes of 500 and 1 thousand rupees will go out of circulation (the exchange rate to the dollar is approximately the same as that of the ruble). These are the two largest banknotes and account for 86% of Indian cash. Modi calls them black cash - the main means of payment for corrupt officials, organized crime, tax evaders, terrorists. Maybe that's how it is. But it is also the main means of payment in construction, trade, the service sector and, most importantly, in agriculture, where it is not easy for workers to get to banks or the post office and exchange their five hundred and thousand rubles on time.

The deadlines are as follows: until November 24, 4 thousand rupees could be exchanged for smaller or new bills at any bank or post office by presenting an identity card. Of these, only 2 thousand can be received in cash, the rest will go to the account. Until December 30, banknotes can be deposited into a bank account in unlimited quantities, but if the amount is more than 250 thousand rupees, you must indicate its source (and you can withdraw no more than 20 thousand per week). There were exceptions - for humanitarian reasons. For 72 hours (then extended until November 24), obsolete banknotes could be used to pay in public hospitals, railway, bus and gas stations, gas stations of state oil companies, cooperative stores and milk stations, as well as in crematoria and cemeteries.

While returning old notes in Kanpur city (Photo: Reuters/Pixstream)

Life's not going well

Unfortunately, some Indian families who lost relatives due to the sudden reform placed their depreciated money in these last two places. By November 18, The Indian Express had collected three dozen such examples. The most typical death is in line at a bank or ATM. Lots of suicides. There was no time to take someone to the hospital (including children) - there was no small money for a taxi. Someone died of a heart attack while listening to the Prime Minister's speech, for example, a farmer who had just sold his land for 7 million rupees (probably never learned that his legal income was not in danger). One man killed his wife when she returned from the ATM with nothing - they were swept clean, since old cash was no good, and there was a limit of 2 thousand rupees per card per day (later increased to 2.5 thousand).

But these are extreme cases. How do India's 1.2 billion people generally react to cash withdrawals? Oddly enough, they are generally welcome. “What Modi has done is good for the country,” says Bharti, a 30-year-old maid with a salary of 8,000 rupees a month. In October she received everything in five hundred rubles, they exchanged 2 thousand for her, but this is not enough for the household. Her husband is a taxi driver; he used to earn 1 thousand a day, but now it’s three times less. They have two children, they have to pay 1 thousand a month for their school, so now they don’t go to school. And so Bharti, praising the prime minister, adds: “But we barely have enough to buy food for the children. Where do we get black money from?”

In the same vein, tea shop owner Upadhyay, whose income has fallen by 70%, says he will not send anything to children in Uttar Pradesh: “But in the end the result will be favorable.” That is, on the one hand, it’s hard for us now, although we don’t deserve it, but on the other hand, the idea is right.

Prime Minister Modi himself probably counted on exactly this reaction from the poor majority. “The abolition of five hundred and thousand dollar bills has caused you inconvenience,” he said at a recent rally. “But some have their entire lives ruined—that’s how I punished them.” Because they robbed the poor, the middle class. They stole your money for their business. That’s why I started this fight.”

Seven monetary reforms

Russia, 1993

USSR banknotes were withdrawn and Russian Federation banknotes were introduced. The exchange took place between July 26 and August 7, 1993. Since September 26, 1993, the circulation of USSR banknotes was prohibited.

During the reform, 24 billion banknotes were seized. The national currency was put into circulation.

Russia, 1998

A denomination of cash currency was carried out 1:1000. The exchange of banknotes and the parallel circulation of old and denominated banknotes continued until 2003.

The result of the reform was a reduction in the nominal size of monetary circulation, the actual return into circulation of coins that had ceased circulation as a result of devaluation.

Ukraine, 1996

A presidential decree announced the introduction of a national currency, the hryvnia. Coupons circulating in the country were exchanged for the issued hryvnia in a ratio of 1:100 thousand. The result of the reform was the creation of a national monetary system of Ukraine.

European Union, 1998-2000

In 1998, the European Central Bank was created to develop and implement a common monetary policy for the union.

In 1999, the European currency, the euro, was introduced into non-cash circulation, and the Economic and Monetary Union was created. Since 2002, the euro has been in cash circulation. Currently, this currency is used in 18 countries. The creation of a unified European monetary system has been completed.

Armenia, 2003

Banknotes in denominations of 25, 50, 100, 500 drams were replaced by coins. Banknotes in denominations of 10 thousand drams were also introduced and banknotes of 1 thousand and 5 thousand drams were modified. The result was a reduction in the cost of producing banknotes.

Türkiye, 2005

The denomination of the national currency was carried out in a ratio of 1:1 million. New banknotes were introduced into circulation and old ones were withdrawn from circulation from 2005 to 2009. As a result of the reform, the scale of prices was changed and the cost of producing banknotes was reduced.

Venezuela, 2008

The denomination of the national currency was carried out in a ratio of 1:1000. The reform was carried out under the slogan “Strong economy, strong bolivar, strong country.” Since the reform, the national currency has fallen several times. To date, the devaluation at the official exchange rate against the US dollar compared to 2008 is 365%. At the same time, on the black market the bolivar exchange rate is significantly lower than the official one.

Everything that has been acquired

Envy and schadenfreude are Modi's trump cards in this campaign. The servants delight in telling each other how their masters reacted to the bolt from the blue: hands on their hearts, howling wives, swearing over how to get rid of forbidden banknotes, despair. These jokes, writes The Sydney Morning Herald, are used by servants to amuse themselves while standing in queues at banks to deposit 250 thousand into their accounts (without declaration). They themselves had never seen such sums in their lives - it was the owners who begged them to save their lost savings in this way. Unselfishly, of course, for 10%, or even 25%.

Suddenly it turned out that the rich are able to politely ask ironers, fruit and flower sellers, and drivers for something. On November 9, the owner addressed 25-year-old Rahul Sharma as “dear” for the first time and told the maid to bring him some tea. Previously, I didn’t even remember his name, he called him “chauffeur”, sometimes, leaving him at midnight, he demanded that he appear by 6 am. On the third day, the owner was split: would you deign to deposit my 250 thousand into your account. “I refused,” says Sharma. “I don’t want anyone to ask later where I, a simple driver, got that kind of money.”

But how many servants must one have, how many street vendors must one persuade in order to place millions, tens of millions, in their accounts? The police have already stopped cars full of suitcases with thousand-dollar bills - these are the drivers who were taking the owner's money to their distant relatives.

Some rich people are smarter than others. One gas cylinder dealer in Uttar Pradesh told The Wall Street Journal how he squandered his 7 million rupees. Half a million was managed through acquaintances in banks - they agreed to carry out transactions retroactively, when large banknotes had not yet been withdrawn from circulation. Another 35 thousand were exchanged for him by a priest in one church. He also paid his 40-odd employees several months in advance. “My security guard was happy,” says the businessman. And I didn’t have to put anything into other people’s accounts.

Protests in New Delhi against the withdrawal of 500 and 1 thousand rupees notes from circulation. November 28, 2016 (Photo: Reuters/Pixstream)

Who was hurt?

It turns out that the rest of the alleged victims, whom the prime minister was targeting, can also cut their losses. And this is good, notes The Wall Street Journal. Because many sectors have already suffered a very powerful blow. After all, 98% of purchases by Indians, according to PricewaterhouseCoppers, have so far been made in cash, but now almost all cash has been confiscated, and they will not be returned immediately, but gradually.

There are no restrictions on non-cash payments - checks, cards, etc. But half of Indians don't have bank accounts. And among those who have them, half almost never use them. Moreover, in rural areas, even an ATM is a rarity: 18 per 100 thousand adults, not to mention bank branches. And most of the population lives in villages - from 65 to 75%. They don’t have time to get to the banks now—it’s just the sowing season. AND

On the night of November 8-9, 2016, currency reform began in India. Its essence is simple: the removal from circulation of banknotes in denominations of 500 rupees (approximately 7.5 US dollars) and 1000 rupees (approximately 15 US dollars). From November 9, 2016, such banknotes are invalid and must be exchanged for new banknotes in denominations of 500 and 2000 rupees or credited to bank accounts.

You can exchange old banknotes for new ones or credit them to your accounts until December 30, 2016. Information about amounts deposited in bank deposits between November 10 and December 30 will be compared with tax returns, and if a major discrepancy is found, violators will have to pay the missing taxes and a penalty of up to 200%. And in September, the tax amnesty expired, thanks to which 652.5 billion rupees of unaccounted income of citizens (about 0.5% of GDP) were declared. Experts note that few took advantage of the tax amnesty; more was expected from it. Now tax evaders face a serious test.

Monetary reforms of this kind are not new in world practice. The current Indian reform is one of the simplest. The officially stated goals of the reform are the fight against corruption, terrorist financing, the shadow economy, counterfeiting of banknotes and increasing tax collection.

The world media is now closely watching India, but their main attention is paid to the unrest that has arisen in connection with the reform. At the end of October 2016, the cash supply in circulation in India was approximately 17.77 trillion. rupees (about US$260 billion). Of the total number of banknotes, confiscated banknotes account for 25%, but in value they are 86% of the country's total cash supply. Retail trade and the service sector rely on this cash; the role of these banknotes in the livelihoods of India's 1.3 billion people can hardly be overestimated.

The developers of the reform created a kind of “bottleneck” that limits the exchange of old banknotes for new ones. Banks were allowed to exchange amounts up to 4,000 rupees ($60) per person, subject to presentation of identification and a written request for exchange. On November 14, the limit was increased to Rs 4,500. It turns out that if a person exchanges the indicated amounts every day until the new year (the deadline), he will be able to receive an amount equivalent to approximately 3.5 thousand US dollars.

Wealthy people with bank accounts and bank cards have alternative ways to receive new banknotes. However, there are limitations here too. In particular, from November 10, 2016, a limit was introduced on cash withdrawals from bank accounts of 10,000 rupees (150 USD) per day or 20,000 rupees (300 USD) per week. From November 14, the daily limit was increased to 24,000 rupees ($360). For ATMs, the withdrawal limit in the form of new banknotes is set at 2,500 rupees (USD 37). Those wishing to withdraw money in the form of small denomination bills are limited to 2,000 rupees per day ($30).

It is possible to exchange quite large amounts of cash for new-style signs, but this may pose difficulties for the citizen. In case of exchange of more than 250,000 rupees (approximately $3,700), you must present a tax return where the exchanged amounts are declared, or pay taxes on the exchanged amounts. There is an element of confiscation reform here.

The developers of the reform designed “bottlenecks” to filter “clean” money from “dirty” ones, but did not carry out the necessary technical preparation for the reform. And she was needed. The number of ATMs dispensing small bills was not enough, kilometer-long queues lined up at them, and the operation of the ATMs themselves continually stopped due to the fact that the money ran out. In addition, the new bills had different sizes, and the equipment was not adjusted for them. Finance Minister Arun Jaitley admitted that 200 thousand ATMs are not ready to work with the new notes, and it will take 2-3 weeks to reconfigure them.

The Indian press notes that, as usual, the poor have suffered the most. Cases of crowds forming near banks and ATMs blocking traffic have become more frequent. As a result of jostling in lines, standing for hours, scuffles and even violent fights, victims appeared. According to press reports, about 80 people have already paid with their lives. Turnovers in retail chains, restaurants, cafes, and other service establishments have sharply decreased.

The authorities had to urgently make adjustments to the rules for carrying out the reform. Acceptance of 500 and 1,000 rupees notes was allowed at gas stations, in government medical institutions, when selling railway and air tickets, in government-owned dairy and diet stores. At first, this permit was valid until November 11, then this period was extended twice more. Almost every day the authorities make new adjustments to the rules for carrying out the reform, trying to reduce the tension that has arisen in the country.

Wealthy citizens began to resort to the services of improvised money changers. We are talking about enterprising individuals who gather teams of poor people who, for a reasonable fee, stand in lines and replace old signs with new ones. The foremen supervise the rank-and-file members, collect cash and transfer it to the customer. Despite the long queues, some members of the money change teams manage to collect double or even triple the norm in one day. Banks engaged in exchanging banknotes tried to prevent violations of daily exchange norms - they marked incoming clients with indelible paint on their bodies. However, resourceful Indians have already learned how to remove this paint.

Foreign tourists can also be included in the category of the most affected. For them, their holiday in India was ruined. Partially the negative effect was mitigated by allowing the exchange of amounts up to 5 thousand rupees (USD 75) in banks during the first three days of the reform, but the ordeal of foreign tourists continues - if only because they cannot use ATMs that are not equipped to work with new bills. Many who have had the misfortune of coming to India during this difficult time do not have any rupees in their hands - neither old nor new. It is almost impossible to approach banks to exchange dollars, euros and other currencies for new rupees. Street money changers offer their services, but they sell rupees at a dizzying rate.

Currency reform in India has one important goal that has not been announced by the country's authorities. This goal is to drive the population into the banking system by limiting the use of cash. The previous reform was carried out in India in 1978. Then banknotes in denominations of 1000, 5000 and 10,000 rupees were withdrawn from circulation. An important attempt was made to limit the use of large denominations as a store of value and to force citizens to use the services of banks. However, India is too accustomed to relying on cash not only as a medium of exchange but also as a store of value. There are many reasons for this, but the most important is that when opening a deposit over 50,000 rupees (750 US dollars), the depositor is required to provide a certificate of the origin of the money.

In general, such a filter system was created to combat “dirty” money in the shadow sector of the economy. According to World Bank estimates, in India this sector accounts for about 25% of the entire economy (there are higher estimates - 30-35%). Trying to limit the shadow sector, the authorities, however, forget that of all those employed in it, those involved in the criminal business (drugs, trafficking in people, weapons, etc.) account for approximately 1 percent. The remaining 99% are those who cannot find work in the legal sector and survive as best they can. There are millions, if not tens of millions, of such people in India, forced to work “in the shadows”. They use only cash, and can open bank accounts only for tiny amounts that do not require certificates.

The Indian press reports that problems arose among local cotton traders: after the unexpected announcement of the reform, supplies of plant fiber were halved and prices rose. Most farmers sell their crops for cash, and the current situation in the country is scaring them away. Even official statistics record that the unemployment rate in India is close to 10%, which is several tens of millions of people. Many of them support their existence only at the expense of the shadow sector.

In the first two weeks from the beginning of the reform, old-style banknotes worth the equivalent of $80 billion were exchanged or deposited in banks. This is approximately 40% of the total mass of banknotes. The process of further “re-registration” of old banknotes has slowed down. Experts believe that by the end of the year, about the same amount will be “re-registered” with great difficulty, and 20% of the money will “burn out.” The expected confiscation effect will reach $40 billion. However, such an effect may not be achieved. Before the new year, tens of millions of poor people will be in demand as money changers serving wealthy Indians. The latter hope that the “helpers” will still provide them with a complete conversion of old signs into new ones.

India, among the third world countries, belongs to those where the share of cash in the total money supply (cash plus non-cash) approaches the indicators of economically developed countries and amounts to 10-15%. For comparison: in the eurozone this figure is close to 10%; in Russia - 20-25%; in economically least developed countries (for example, the Central African Republic, Chad, Afghanistan) - from 40 to 50%. The current reform is designed to push Indian residents to more actively use non-cash money, to turn them into lifelong bank clients. The flip side of the reform could be depriving millions of Indian citizens of their last means of subsistence. Political opponents of Prime Minister Modi have already announced their intention to unite and prevent further demonetization of the economy.

One of the first consequences of the reform was that the authorities are trying to drive the country into a “cashless environment”, and the population has a backlash. Even those who have long used “plastic” (debit and credit cards) and bank accounts are now thinking about how to distance themselves from banks and not end up in an “electronic banking concentration camp.” The reform has created distrust in the cash of the state; experts expect an increase in demand for foreign cash. In part, these sentiments have already been reflected in the exchange rate of the Indian rupee, which has fallen against the dollar and other leading currencies of the world.

Valentin Katasonov, Doctor of Economics, Professor, Chairman of the Russian Economic Society named after. S.F. Sharapova

Queue at a bank branch in Kolkata to exchange banknotes on November 10, 2016 // by Biswarup Ganguly

Indian Prime Minister Narendra Modi on November 8 announced a fresh start on November 9, 2016, for monetary reform under the motto “Clean Rupees”. In his address to the nation, N. Modi outlined its main goals - eradicating corruption, bringing capital out of the shadows, increasing tax collection, and fighting terrorism.

In the third year of Narendra Modi's premiership, the Indian economy continued to develop with a GDP growth rate of 7.3-7.5%. This figure remains one of the highest in the world economy, although it was not possible to reach 7.9%, as previously expected. There was no noticeable growth in industry and, accordingly, no changes in the structure of GDP. The government continues to enjoy the support of the majority of the population, including the growing urban middle class, thanks to N. Modi's high popularity. However, the ruling Bharatiya Janata Party (BJP), as in previous years, was unable to pass through the upper house of the Indian Parliament a law on taxes and fees levied on suppliers of goods and services when crossing internal borders between states. The adoption of this law will create a single giant market, revive domestic trade and increase tax revenues to the federal budget. As has become the rule under N. Modi, this task is reflected in the slogan: “Make in India by making one India.” The Indian National Congress (INC) party, the main opponent of the BJP, has been preventing the adoption of this law for several years, protecting the interests of the growing local elites. Certain difficulties for the government arose due to a poor harvest of legumes, which required an increase in their imports. The recently adopted amnesty of capital previously withdrawn from the country did not bring noticeable results. The state of the economy is negatively affected by the reduction in export earnings due to the recession in the world economy. India is in dire need of influx of foreign direct investment.

Against this difficult background, after a long break, another monetary reform began in India. The previous reform with the removal of large notes in denominations of 1000, 5000 and 10000 rupees was carried out in 1978, then the Indian economy was typically agrarian-industrial with a traditional service sector. The declared goals of the current reform are necessary for the further development of the country, but are difficult to implement due to the objectively prevailing conditions. Corruption in India is not an independent phenomenon, but a stable system that permeates the economic fabric of the country. As a socio-economic factor, it is intertwined with traditions and modern market relations. The same can be said about the shadow economy. Its extent in India is not precisely determined, as in most developing countries. The World Bank believes that the informal sector accounts for 25% of GDP in India; they also call the figure 30-35%. A significant part of the workforce is employed in the “shadow”, producing goods and services and non-taxable cash flows. Only 2% of the population officially pays taxes in India. In 2014/15, the tax shortfall amounted to about 100 billion in dollar equivalent. It is the shadow sector that is an important source of funds for criminal structures, as well as terrorist groups. “A blow to the black market,” as the 2016 reform is characterized in the press, has specific, but difficult to implement goals.

The monetary reform is terminated and the largest and most common national banknotes of 500 and 1000 rupees (at the rate of 480 and 960 rubles), which constitute 86% of the total money supply in the country, are removed from circulation. They have lost purchasing power and are being withdrawn from circulation by the state. On the night of November 9, 2016, the procedure for converting old national currency notes into new ones, which became slightly larger in size, brighter in color and retained the portrait of Mahatma Gandhi, came into force. According to the exchange rules, Indian citizens hand over their out-of-circulation money to banks, presenting an identity card, and receive new banknotes in denominations of 2,000 and 4,000 rupees, which have become the largest in the country's monetary line. The upper exchange limit was initially limited to 4,000 rupees, but was almost immediately raised to 4,500. When depositing large amounts, you must fill out a detailed form indicating the sources of their origin for verification by the Indian tax authorities. One could withdraw up to 10 thousand rupees from personal bank accounts, which was soon increased to 24 thousand new rupees at a time. ATMs dispense no more than 2,000 new rupees, but many of them do not work for objective reasons. In total, there are about 200 thousand ATMs in the country; it is impossible to reload them in a short time. The exchange procedure, as announced, is valid until December 30, 2016.

It is difficult to hope for a conflict-free implementation of a reform of such a scale in a country whose population, according to the latest data, exceeds 1,300 million people. Their reaction was predictable, but no less complex - panic, giant queues, crushes, even fights at the entrance to banks. Trade, especially retail trade, the most widespread type of sales in India, has stopped due to the refusal of sellers to accept old bills and a shortage of change money. Banks called in additional employees, began working seven days a week, established separate queues for different categories of citizens, the elderly, disabled people, bank card holders, etc. Long before the current reform, one of the directions of N. Modi’s financial policy was an attempt to accustom the population to use bank cards and electronic means in order to bring money out of the shadows and facilitate state control over its flows. Therefore, bank card holders received some advantages when exchanging money during the current reform. The press started talking about a possible preliminary leak of information, citing the fact that in July - September 2016 in the state of Gujarat, in which N. Modi held the post of governor for two terms, there was a peak in the opening of new bank deposits. During the first 4 days of the reform, 184 million transactions were carried out in banks. Recalling the experience of election campaigns, the heads of banks, in order to avoid repeated exchange transactions by citizens in different bank branches on the same day, which was prohibited by the rules of the reform, ordered to mark the hands of citizens who received new banknotes with indelible ink. As it turned out, this was not an obstacle. Wealthy clients with large sums of old money formed groups of poor people and, for a small fee, under the control of trusted people, carried out exchange transactions in banks through them. (A kind of combination of corruption and shadow activity). The difficulties are compounded by the relatively weak penetration of bank branches in rural and hard-to-reach areas. The main burden fell on large cities. Newspapers began to publish complaints from residents about hours-long queues and the inability to exchange money after standing for 6-8 hours. The dollar exchange rate jumped sharply, and the price of gold rose. N. Modi urgently appealed to the citizens of the country, asking them to calm down and give him 50 days to solve problems with the exchange of money. He assured that the Reserve Bank of India (RBI), the country's monetary regulator, is monitoring the situation and there are no problems with the amount of national currency. To soften the situation a little, it was urgently allowed to accept old banknotes at airports, railway stations, gas stations, hospitals, and when arranging cremation. But these measures did not calm the population. Predictions of mass unrest as a consequence of the reform appeared in the Indian press. But it seems that the Indian government, although it did not expect such a surge of discontent, is coping with the situation without causing serious social disruptions.

Currency reform in India 2016- an exchange of large banknotes carried out in India in November-December 2016 in order to overcome the “negative” phenomena of the shadow sector of the Indian economy.

History and background for reform

The Indian authorities have used the removal of large banknotes from circulation in the past. In January 1946, banknotes of 1,000 and 10,000 rupees were withdrawn from circulation; subsequently, in 1954, banknotes of a new type in denominations of 1,000, 5,000 and 10,000 were issued. In 1978, the government, under the pretext of fighting counterfeiters and shadow trafficking, again withdrew large banknotes in denominations of 1000, 5000 and 10,000 rupees from circulation.

At the end of October 2016, the cash supply in circulation in India was approximately 17.77 trillion rupees (about 260 billion USD), of which 500 and 1000 rupees notes constituted about 85% of the value and about 25% of the number of banknotes in circulation .

Following the formal announcement of the reform by Prime Minister Modi, a televised press conference was held where Reserve Bank of India Governor Urjit Patel and Finance Ministry Secretary for Economic Affairs Shaktikanta Das reported on the government's reasons for implementing the reform. In particular, they linked the increase in the number of 500 and 1,000 rupee notes to the activities of counterfeiters and reported that the proceeds from the distribution of counterfeit money were used to finance terrorists. The reform, according to participants in the press conference, is being carried out to remove counterfeit banknotes and deprive terrorists of funding.

In addition, in the Indian economy, the shadow sector at the end of 2016 was, according to some estimates, about 30 trillion rupees (about 450 billion USD) or up to 20% of India’s GDP. The shadow circulation of funds, which was largely cash, was considered by the government as the main source of tax evasion, and the reform was an attempt to bring these funds into “white” circulation for subsequent taxation.

Exchange procedure and rules

The order and procedure of the reform was initially announced by Prime Minister Modi in his televised address, later the detailed order and subsequent changes were communicated by the Reserve Bank of India and the Ministry of Finance:

Progress of the reform and reaction to it

In India

Preparations for the reform were carried out in secrecy, and the announcement of the reform on November 8, 2016 came as a surprise to Indian citizens. Immediately after the announcement of the reform, queues of people lined up at ATMs that dispensed banknotes of 100 rupees or less, withdrawing money for the next day's expenses.

ATMs and bank branches were not ready for mass exchange; queues formed in many bank branches and ATMs. The press noted that the poorest segments of the population suffered the most due to significant losses of working time on the way to banking institutions and long waits for exchange.

Indian officials unanimously supported the reform, calling it a decisive step to combat the black market.

In Russia

Some observers [ ] noted the confiscatory nature of the reform and its similarity with the 1991 reform in the USSR [ significance of the fact? ] .

Reform results

In general, there was a slight improvement in the economy due to a slight “unshadowing” of money, but confidence in the Indian rupee was shaken, and its exchange rate dropped for a while. Instead of switching to cashless payments, which Indian economic leaders have long been striving for, the country's population began to trust cash more for a while. The reform also provoked a rush of demand for gold.