Over 90 percent of transactions in India are conducted in cash and the country’s poorest have no access to banking. Many people are unable to buy food and daily essentials due to the lack of new notes in circulation.
Tens of thousands of people rallied in a few states in India on Monday to protest the country’s ban on high-value banknotes, which opposition party members say has caused a “financial emergency”.
Nearly three weeks ago, Prime Minister Narendra Modi shockingly decided to pull 86 percent of the currency from circulation overnight. The move triggered a chronic shortage of notes in an economy that operates mostly on cash.
“We are protesting against the undeclared financial emergency imposed by the government and the hardships people across the country are facing because of this illegal decision,” Manish Tiwari of the opposition Congress party said.
To protest the ban, an estimated 6,000 people turned to the streets in Mumbai, India’s western commercial hub, police said. While in the eastern city of Kolkata, capital of West Bengal state around 25,000 people rallied on the streets.
“The decision to demonetise high-value currency was done without any authority and legislation and is clearly illegal,” Tiwari continued.
However, many Indians say they support the regulation if it forces the rich to pay their taxes by making them bank undeclared income.
Owners of the banned 500 and 1,000 rupee ($7.30, $14.60) notes have until the end of the year to deposit them in a bank but they can only exchange a small number for new currency since authorities are struggling to print enough new notes to meet the demand.
Many people have been left without sufficient cash to buy food or daily essentials, while farmers have been unable to buy seeds and small traders say business has fallen off a cliff.
“I do not disagree with the objectives but it is a monumental case of mismanagement,” the Congress party lawmaker told parliament.
“The way demonetisation has been implemented, it will hurt agricultural growth and all those people working in the informal sector.”
Economists say that the lack of new notes in circulation will affect growth.
Former prime minister Manmohan Singh, a respected economist, said last week the ban would take off at least two percentage points from growth, which reached seven percent in the first half of the financial year.