Why is the Indian rupee not getting stronger?
Into the cashless society: India declares the majority of all rupees to be worthless
The Indian government surprisingly abolished the two banknotes with the largest denominations on Tuesday, declaring around 86 percent of the cash in circulation to be worthless. This step, which is allegedly directed against corruption and the shadow economy, could give the gigantic country a boost towards a cashless society like that Hindustan Times summarizes. The now invalid 500 (around 6.80 euros) and 1000 rupee notes (around 13.60 euros) can be exchanged for others or the new 500 or 2000 rupee notes, but no more than 4000 Indian rupees ( around 54.20 euros). The rest must be paid into accounts.
Less shadow economy, more tax revenue
Overall, the plans, which were implemented extremely quickly, amount to a society in which there is likely to be significantly less cash, but in which more than the current 3 percent of the working population pay taxes. In the future, Indians will only be allowed to withdraw 4,000 rupees per day from ATMs, so the weekly limit in branches is 20,000 rupees. This change is likely to be particularly painful for those Indians who do not have a bank account. According to the World Bank, that was almost half of all 1.2 billion inhabitants two years ago. The drastic step could now also become a problem for tourists, but they can at least change back into their own currency this week.
India's prime minister announced the end of the two banknotes on Tuesday evening, a few hours before the notes lost their value at midnight local time. Shortly thereafter, long queues formed in front of the ATMs, but they either spit out nothing or very little, reports the dpa. On Wednesday, therefore, customers jammed in front of gas stations and pharmacies, as these are among the few places that are allowed to accept the large bills a little longer. Smaller shops and street vendors have visibly fewer customers - which is likely to remain that way for the time being due to the lack of devices for cashless payment.
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