India is in the midst of a battle over Black Money (the corrupt, tax-avoiding economy) and Prime Minister Narendra Modi has taken the radical step of declaring the two largest notes (500 IR and 1,000 IR – £6 and £12) completely worthless. A new 2,000 IR has now been issued and anyone with the old notes has 50 days to change them at the bank, but if you try to change over £3,000, you will have to explain where you got it to the taxman.
Although the move against corrupt money is popular, the chaos such a sudden move has caused has had a huge impact on a country that is cashed based.
ATMs do not issue 100 IR notes, the remaining ‘large’ note (worth just over a quid), and most Indians do not have the resources available to withdraw 2,000 IR.
Those that do – the middle class, small business etc – are queuing in long lines with tourists at the ATMs and these are constantly out of money. So there is a new tourist trail, from one machine to the next, often to find five or six sites empty and a long queue at any till with money, after which you may be allowed to withdraw £12, in the form of one note, that no-one can change!
Like many tourists, we have been told when trying to pay for a meal and drinks with a 2,000 IR note, ‘come back when you have change’ and in rural parts of India bartering is back in fashion. Meanwhile locals tell us that gangs are recruiting hundreds of poor people to launder black money through local co-op bank accounts, set up for the poor and consequently tax free. Declaring 85% of your banknotes worthless is pretty dramatic, but I have a feeling the crooks will find ways around it and the price will be paid in the local economy throughout India.
One of my most surreal, and thought provoking experiences in the last few weeks has been a visit to a ‘Beverage Shop’ in Alappuzha. The government in Kerala is aiming to make the State ‘dry’ in the next five years and has annulled drinks licences for all but 5 star hotels. Of course tourist restaurants sell beer and wine in cups, with the bottle discreetly wrapped in newspaper under the table.
Locals find it more difficult to buy alcohol and are largely restricted to the State licensed ‘Beverage Shops’.
We had booked a trip on a houseboat and the owner suggested we might want to bring some beer on board. So I jumped out of a tuk-tuk at the Beverage Shop on the way to the harbour. Even this early in the morning, the queue was
substantial, and was decidedly all-male, rough and ready and very keen to buy liquor as the previous day has been entirely dry. Perhaps concerned for my well-being, they ushered me in through a steel side door, into the back of the shop. It looked like a scene from the Jimmy Cagney prohibition movies in 1920’s America. It was dark and very hot. The shop front had customers crushed against the bars along its entire length, waiting anxiously to be served. The cashier was a young man, sitting at a desk counting money and printing receipts. He wore a baseball cap, sunglasses and a bandana, despite the heat and the gloom. The owner was large, sitting on a stool stacking ‘brick’ after brick of notes on a shelf. There were tens of thousands of rupees there and they’d not long opened. Nobody but me wanted beer, they wanted cheap hard liquor, and they wanted it now. The owner told me what I could have – British Empire beer, I didn’t argue. I left through the steel door with the abiding image of the faces pressed against the bars, and the stacks of money piling up.
Of course the wealthy drink in 5 star hotels, and get others to buy their alcohol for enjoyment at home. But given the demand, I have a strong feeling prohibition, just like in the roaring twenties in America, is not going to work and will make some people very very rich.