Long Lines, Black Markets: How India’s Cash Crunch Looks On Street Level

Queuing for cash in India
Queuing for cash in India
Bismillah Geelani

NEW DELHI I am outside the Reserve Bank of India building in New Delhi. It's 8 a.m. The bank opens at 9 a.m. but more than 300 people have already queued up here.

Among them is 60-year-old Mohammad Mustaqeem. He runs a garment shop but hasn't been able to open it for the last three days. "There's no business in the market. The only thing for us to do now is to stand in these queues for money because without it we can't even get food."

"The grocer is now refusing credit so we can't get milk, we can't get vegetables and other things. I'm a diabetic but I haven't taken medicine for three days because I can't pay the chemist. Nobody is accepting the old notes," Mastaqeem told me in desperation.

At another bank, 45-year-old Shobha Devi is getting annoyed at the slow pace of withdrawing money. She has been going from bank to bank this morning to get cash and this is the third one. Hopefully, she says, this one will have money.

Since last week, there have been long serpentine queues outside banks, ATMs and post offices across the country. India is reeling from a severe cash crisis following the government's decision to withdraw high-value currency notes from the country's financial system. The government has described the move as a "surgical strike" against "black money," referring to unaccounted for money. The scarcity of cash has thrown daily life in India out of gear.

Millions of people are rushing to change their old currency after the government's decision to withdraw 500 and 1000 rupee notes from circulation. Prime Minister Narendra Modi says the decision is necessary to crack down on corruption.

"There comes a time in the history of a country's development when a need is felt for a strong and decisive step," Modi had said when he announced the decision. "To break the grip of corruption and black money we have decided that the 500 rupee and 1000 rupee currency notes presently in use will no longer be legal tender from midnight tonight. This means that these notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper."

Severe restrictions have been placed on the amount that can be changed and withdrawn from banks at a time. People who have these notes will have until the end of the year to change them at banks and post offices.

Queuing for cash in India — Photo: Bismillah Geelani

Many economists, financial experts and ordinary citizens have lauded Modi for the move.

"This is a historical step, we should all support it because we know that 20 to 40% of our economy was in the parallel or black economy," says Rajiv Kumar of the New Delhi-based Centre for Policy Research. "The fact is that this is like routing out malignancy from your system and that's why you have people after people from the middle class praising Modi because when you have malignancy you are prepared to bear a bit of the pain of the chemo and radiotherapy that you get."

But as a financial crisis deepens, the voices of dissent are growing louder.

"I think with every passing day people are losing patience over the scheme. The sentiment that this is a minor convenience for a greater good is reducing by the day," says journalist Shivam Vij. "The suffering that the people are going through is far from minor inconveniences."

"There have been till yesterday at least 25 deaths because of demonetization. This includes suicides, heart attacks, and elderly people collapsing in queues, that is the kind of suffering. Can you imagine if 25 to 30 people had died in a terrorist attack we would have been asking for a war with Pakistan," he says.

The 500 and 1,000 rupee notes are the most widely used forms of currency accounting for more than 80% of the current cash flow in India.

Jayati Ghosh, a professor of economics at New Delhi's Jawaharlal Nehru University, says the move doesn't address the problem of black money. "Let's first of all recognize that black money is not a stock that people keep under their beds and so on. It's a process, it is transactions. What you have to do is curb transactions that create black money," she said.

"Black marketers don't keep currency, that must be 5 or may be 6% of their total holdings. They buy other assets, they buy gold, they buy foreign exchange, they put their money in foreign accounts, they buy real estate, they do all of those kinds of things."

The opposition parties are also up in arms against the move and have formed a united front to demand a roll back of the measure. The government has rejected the opposition's demand while reassuring people that they will implement swift measures to minimize the hardship people are facing.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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