Indian businesses accept US dollars
India and Corruption : India is invalidating large bills
When Ankit Saini woke up in New Delhi on Wednesday morning, he still had bills in his wallet - but worthless. The three 500 rupee bills had expired overnight while the student was sleeping. "With the 40 rupees (50 cents) I have left, I can either have lunch or take the bus," complains Saini. On Tuesday evening, the news in India that all 500 and 1000 rupee notes would lose their validity as legal tender from midnight onwards triggered panic. People tried to get rid of their large bills as quickly as possible.
In a televised address, Prime Minister Narenda Modi had told the astonished nation that in the fight against corruption and black money, the large banknotes would be nothing but paper in four hours.
According to the central bank, banknotes worth the equivalent of US $ 217 billion lost their value in one fell swoop. New 500 and 2000 rupee notes are due to be put into circulation on Friday. Old banknotes can still be deposited into your own account with a valid ID until the end of the year. But with larger sums, the tax authorities will ask where the money is coming from. So far, around two percent of Indians pay taxes on their income.
Not everyone is convinced of Modi's drastic step. "We're not the ones with black money, and if we don't earn anything for two days, then we have nothing to eat," said Bachchu Lal, who sells vegetables from his wooden cart and hardly had any customers on Wednesday. Almost 70 percent of the more than 1.2 billion Indians have to get by on less than the equivalent of two US dollars a day. Tea sellers, greengrocers, construction workers, domestic workers, artisans and rickshaw drivers live on cash. Even real estate is paid for in cash, as are cars, motorcycles and dowries. Between 200 and 300 million Indians do not have a bank account, let alone a credit card.
It is not the first time India has invalidated large bills. In 1977 the Janata party canceled the large banknotes - in order to reduce the political opponent's coffers. The banknotes play a crucial role in the election campaign. With liquor, gifts and banknotes, voters are lured to the urns to put the cross in the right place. There will be five major state elections in six months. The cash restriction could be a blow to Modi's opponents, but it could also hurt his party.
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