appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

appConfig

filter

json

liveArticle

Agence France-Presse

When India declared most bank notes unusable a year ago in what was sold as an effort to flush out tax cheats, one steel manufacturer was so spooked he decided to do business by the book in future.
But 12 months on from the shock move, the industrialist says he has gone back to cash under the table at the insistence of his buyers – undermining government claims that the bold scheme has cleaned up India’s graft-ridden economy.
Prime Minister Narendra Modi’s decision last November to withdraw India’s high-value rupee bills was intended to root out a culture of tax evasion so widespread it had become the norm.

His Bharatiya Janata Party (BJP) had won the 2014 election on a promise to fight corruption, which had led to popular disillusionment with the previous government.
But the move to ban 500 and 1,000 rupee (US$7.50 and US$15) notes wrought havoc on businesses in Asia’s third-largest economy, causing growth to slump to levels not seen since Modi was elected.

Now, as businesses from roadside stalls to wholesalers rekindle their love affair with cash, Modi is coming under pressure to explain whether the most controversial policy of his tenure was worth the economic pain or the hardship it caused in the country’s poor.

The steel producer, who spoke on condition of anonymity, said his efforts to keep business above board backfired when his buyers insisted on paying cash – and keeping their payments off the books.
“They said, ‘we have cash at home, and if you want to be paid, we can pay you in cash immediately, but we cannot arrange a bank payment’,” he said.

The government had hoped the surprise move, which meant high-value notes could not be spent and instead had to be banked, would encourage a switch to traceable digital payments in a country where just three per cent had been paying taxes.
Modi personally championed credit and debit cards in the aftermath of demonetisation, beaming down from billboards encouraging Indians to embark on a digital revolution.

But sales from plastic have declined 13 per cent from highs in December 2016, when new cash notes were scarce.
Mobile banking figures for August, the latest data available, showed US$16 billion in transactions – a 20 per cent drop compared with November.
Sanjay Moria, a tea vendor in central Delhi, said at least half his income in the weeks after demonetisation came through a popular payment app, but since then, digital sales had plunged.

“I’ll take any form of payment, but people are mostly back to paying in cash,” he said, as office workers sipped hot spiced tea from small paper cups.
Many poorer Indians, reliant on cash, were left scrambling to buy basic necessities as their meagre savings evaporated in an instant.

“Was it worth it? Certainly not,” said Sunil Sinha, principal economist at India Ratings & Research. “It brought huge pain and disruption. People lost lives, lost their livelihoods.”
Authorities also expected that a portion of non-tax payers would fail to bank their unusable cash for fear of exposure.

But in August the Reserve Bank of India announced that 99 per cent of the devalued bills had been returned, undermining Modi’s claim that stashes of black money would be uncovered.
Now traders say they are operating much as they did before the ban, with cash once again king, as fears of being stung by the taxman have faded.

“We’re in a wait and watch phase before we decide if we should increase the cash portion [of the business] or not. It depends how closely the government monitors this,” said a dry fruit importer in a traditional market in Delhi’s old quarter. “Everyone does this. This is how business is done in India.”


Why India is rolling out welcome mat for Myanmar’s Min Aung Hlaing

In sign of easing UK-China ties, British Foreign Secretary set for talks, tech hub visit

India seals BrahMos missile deal with Vietnam, eyes Indonesia next

US senator warns of Indo-Pacific risks as Hegseth stresses ‘quiet’ tactics

India

India’s black money market booming a year after Modi’s controversial cash crunch

A man holds up a banned 1,000 rupee banknote during a protest against the demonetisation, in Bangalore, India, in November 2016. Photo: EPA

Muhammed Arif hands over an Indian one hundred rupee banknote to pay for his purchase at a street stall in Modinagar, Uttar Pradesh, India, on Wednesday, Nov. 9, 2016. Over a week since Prime Minister Narendra Modi shocked the nation with the withdrawal of large denomination notes there was no sign the government had managed to print enough notes to replace its withdrawal of 86 per cent of currency in circulation. Photographer: Anindito Mukherjee/Bloomberg

(FILES) In this file photograph taken on November 9, 2016, an Indian toll booth employee receives money above a notice announcing old 500 and 1000 rupee notes will not be accepted at the Dankuni Toll plaza, some 30km north of Kolkata. When India declared most bank notes unuseable a year ago in an effort to flush out tax cheats, one steel manufacturer was so spooked he resolved to do business by the book in future. But 12 months on from the shock move, the industrialist says he has gone back to cash under the table at the insistence of his buyers -- undermining government claims that the bold scheme has cleaned up India's graft-ridden economy. / AFP PHOTO / Dibyangshu SARKAR / To go with: INDIA-GROWTH-CASH,FOCUS by Megha BAHREE

Indians deposit discontinued notes on the last day in a bank in Gauhati, India , Friday, Dec. 30, 2016. India yanked most of its currency bills from circulation without warning, delivering a jolt to the country's high-performing economy and leaving countless citizens scrambling for cash. Still, as Friday's deadline for depositing old 500- and 1,000-rupee notes draws to a close, Prime Minister Narendra Modi's government has called the demonetization drive a great success in drawing out tax dodgers and eliminating graft. (AP Photo/ Anupam Nath)

(FILES) This file photo taken on November 17, 2016 shows Indian people standing in a queue to withdraw money from an ATM in Amritsar. When India declared most bank notes unuseable a year ago in an effort to flush out tax cheats, one steel manufacturer was so spooked he resolved to do business by the book in future. But 12 months on from the shock move, the industrialist says he has gone back to cash under the table at the insistence of his buyers -- undermining government claims that the bold scheme has cleaned up India's graft-ridden economy. / AFP PHOTO / NARINDER NANU / To go with: INDIA-GROWTH-CASH,FOCUS by Megha BAHREE

Indian Prime Minister Narendra Modi, second right, talks to his cabinet colleagues as he arrives for the opening day of the winter session of parliament in New Delhi, India, Wednesday, Nov. 16, 2016. Last week, Modi announced in a surprise nighttime TV address that all 500- and 1,000-rupee notes, worth about $7.50 and $15, would be withdrawn immediately from circulation, a move designed to fight corruption and target people who have been dodging taxes by holding immense stockpiles of cash, known in India as "black money." (AP Photo/Manish Swarup)

Leftist activists shout slogans against Indian prime minister Narendra Modi as they burn his effigy, decorated with posters of rupee notes, during a protest rally in Kolkata on November 14, 2016. Prime Minister Narendra Modi on November 14, urged Indians to give him more time to resolve a cash crunch that followed the withdrawal of high-value banknotes from circulation, as rival politicians lashed out at his handling of the crisis. / AFP PHOTO / Dibyangshu SARKAR

A notice reading "We Are Out Of Cash" is displayed on the shuttered entrance of a currency exchange store in Delhi, India, on Friday, Nov. 25, 2016. India's government is grappling with a furor over a rupee note ban that invalidated 86 percent of the currency in circulation. Photographer: Anindito Mukherjee/Bloomberg

Indian policemen detain an activist of India's main opposition Congress party during a protest against the government's decision to withdraw high denomination notes from circulation, in Ahmadabad, India, Saturday, Nov. 19, 2016. Banks have been swamped throughout the week as people have thronged to exchange currency notes or withdraw their weekly limit of 2,500 ($37) from ATMs. The government says it's trying to rush the printing of new 500 and 2,000 rupee bank notes but hasn't been able to keep up with demand. Banks and ATMs run out of cash well before the end of work hours, leaving millions of people stranded without money. (AP Photo/Ajit Solanki)

(FILES) In this file photograph taken on November 10, 2016, an Indian bank customer counts old rupee notes as he waits outside a bank to deposit and exchange them in Kolkata. When India declared most bank notes unuseable a year ago in an effort to flush out tax cheats, one steel manufacturer was so spooked he resolved to do business by the book in future. But 12 months on from the shock move, the industrialist says he has gone back to cash under the table at the insistence of his buyers -- undermining government claims that the bold scheme has cleaned up India's graft-ridden economy. / AFP PHOTO / Dibyangshu SARKAR / To go with: INDIA-GROWTH-CASH,FOCUS by Megha BAHREE