Just months after Indian Prime Minister Narendra Modi’s announcement to demonetize two of the most widely used banknotes in the country, the circulation of cash halved, declining from over 18,000 billion to 8,000 billion rupees. Such drastic change in India’s cash-based economy led to disastrous economic and financial impact.
Within weeks after the demonetization, the general population of India struggled to obtain enough cash to support daily living and finance day-to-day operations. On most salary dates in mid-month and at the end of each month, individuals had to wait more than 24 hours to claim their own money.
On November 17, the Indian government and its central bank cut the daily limit on cash exchanges from 4,500 rupees to 2,000 rupees. As cash became even more scarce and the central bank’s initiative virtually disallowed people from withdrawing cash without creating a bank account, a substantial number of individuals took it to the extreme and committed suicide.
In fact, 33 people deaths have been reported within 30 days after the announcement of demonetization in mid-November. Some individuals committed suicide out of sheer frustration while others died of exhaustion waiting in line to receive cash from banks and ATMs.
(People lining up in front of ATMs
Local publications including the Indian Express reported horrifying incidents of deaths stemming from the demonetization of banknotes:
“Four days before his daughter’s wedding, Sukhdev Singh died of a heart attack in Tarn Taran, Punjab, as he was unable to buy groceries and other items due to shortage of new currency notes. A two-year-old died in Sambhalpur, Odisha, after an autorickshaw driver refused to take the family to hospital as they did not have lower denomination notes to pay the fare.”
Yet, the government continued to push the initiative, claiming that it is an important phase of financial development that will eliminate criminals and reduce criminal activities involving money. For the long-term growth of the Indian economy, Prime Minister Modi stated that the demonetization of banknotes was ultimately beneficial for the general population of India.
However, people of India harshly criticized Modi for his ignorance against current financial and economic status of the country. Individuals could not comprehend the Modi administration’s intent in pushing the demonetization regardless of its impact on the Indian economy.
As a result, an increasing number of individuals and businesses have begun to migrate from traditional banking systems and financial services to alternative currencies and assets like bitcoin. Local bitcoin exchanges including Coinsecure, Zebpay and Unocoin saw rapid increase in user base and trading volumes, demonstrating the rising demand of bitcoin within the country.
“Our trade volume in November touched .Rs 120 crore, up by 25% compared to October, and our revenue grew 25% as well,” said Saurabh Agarwal, cofounder of Zebpay.
Unocoin CEO Sathvik Vishwanath also stated that it observed an exponential growth in user base, which increased to 120,000. Its trading volume doubled as well, to 300 bitcoins a day.
“There has been a tremendous increase in awareness about bitcoins this year. Till last year, we had to explain to people what bitcoin was,” sai Vishwanath.