Prime Minister
Narendra Modi on Friday defended his decision to withdraw high
denomination bank notes from circulation, as a deadline to end severe
cash shortages passed with Indians still queuing at banks to deposit
savings and withdraw money.
Modi
abolished 500 and 1,000 rupee bills on Nov. 8, taking out 86 percent of
cash in circulation, in a bid to fight corruption, end terror financing
and turn India into a cashless society.
The
move, however, caused a major cash crunch as the government struggled
to replace old notes with new 500 and 2,000 rupee bills. Modi had asked
for 50 days, until the end of this month, to ease the crisis.
Speaking
in New Delhi at the launch of a digital payment app linked with a
nationwide biometric database, Modi exhorted Indians to reduce their
dependence on cash.
"The world is surprised to see the way we've overcome the challenge after 86 percent of cash was withdrawn," Modi said.
He is expected to address the nation on New Year's Eve to further talk about so-called "demonetization".
While
cash shortages have eased somewhat, bankers and analysts said the
situation is far from normal and could last at least another six months.
They said the move could hit economic growth and lead to job losses and
a drop in demand for goods.
Only
35-40 percent of ATM machines were dispensing cash, according to
Ramaswamy Venkatachalam, managing director, India and South Asia,
Fidelity Information Services, a banking technology provider.
The
government has put a weekly cap on how much an individual can withdraw
from an account at 24,000 rupees, but many banks were only handing out
10-15,000 rupees to clients because they did not have enough cash to go
around, said Harvinder Singh, general secretary of All India Bank
Officers' Association, which represents nearly 300,000 bankers.
Singh said ATM operations were unlikely to be normal before the end of February.
"I'm here to deposit a few old notes before the deadline expires," said Rakesh Kumar, lining up outside a bank in New Delhi.
"But
I expect the government and RBI (central bank) to quickly replenish
banks and ATMs with new notes so that we can withdraw without any
trouble."
Modi's radical decision
is turning into a test of his popularity, and is already a central issue
in Uttar Pradesh, India's most populous state, where the outcome of
state elections early next year will be key for Modi's expected bid for a
second term in 2019.
The cash
shortages have started to make some allies and members of his ruling
Bharatiya Janata Party anxious, with some distancing themselves from the
move.
The
opposition, led by the Congress party, has joined forces, mocking the
government for being ill-prepared and blaming it for hardships faced by
the poor as a result. It has called for Modi's resignation.
"In
the last 50 days, the people have been put (through) enormous hardship
and suffering," said P. Chidambaram, a senior leader from opposition
Congress party and former finance minister.
"Altogether,
the whole exercise has been a case of total mismanagement,
administrative collapse and widespread corruption," Chidambaram added,
accusing the government of taking the decision in haste.
Chidambaram said Modi should make "a categorical announcement" that all curbs on cash withdrawals would end.
Our Standard Of Living Is Coming To An End, Expect A 30-50% Drop: Bill Holter
