Kolkata // Tens of thousands of Indians joined nationwide protests on Monday against the government’s decision to withdraw high-value banknotes, which the organisers said had caused a financial emergency in a country that operates almost entirely on cash.
Nearly three weeks after prime minister Narendra Modi suddenly announced the immediate withdrawal of 500 and 1,000-rupee notes – about 86 per cent of the currency in circulation – Indian is still struggling with a chronic shortage of cash.
Many ordinary citizens have said they supported the scheme if it forced the rich to pay their taxes by making them bank undeclared income, but economists have warned it could hit growth hard.
About 25,000 people took to the streets of the eastern city of Kolkata, capital of West Bengal state, whose left-wing chief minister Mamata Banerjee has warned of “riots and epidemics” if the ban continues.
Protester Sumit Sen said he had been forced to close his grocery shop after business slowed to a trickle.
“Running my grocery shop became impossible,” said Mr Sen, 45. He urged the government to reverse the move.
An estimated 6,000 rallied in Mumbai, India’s western commercial hub, police said.
“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,” said Manish Tiwari of the opposition Congress party.
“The decision to demonetise high-value currency was done without any authority and legislation and is clearly illegal.”
Holders of the defunct 500 and 1,000-rupee notes have until the end of the year to deposit them in a bank, and can directly exchange only a small number for new currency.
But authorities have struggled to print enough new notes to meet demand and economists say the ensuing cash crunch will hit growth.
Former prime minister Manmohan Singh, a respected economist, said last week it would shave at least two percentage points off growth, which topped 7 per cent in the first half of the financial year.
“I do not disagree with the objectives but it is a monumental case of mismanagement,” the Congress party MP told parliament.
“The way demonetisation has been implemented, it will hurt agricultural growth and all those people working in the informal sector.”
More than 90 per cent of transactions in India are conducted in cash and many of the country’s poorest people have no access to banking.
Many have been left without enough cash to buy food or daily essentials, while farmers have been unable to buy seeds. Small traders say business has plummeted.
Mr Modi has repeatedly defended the scheme, accusing its detractors of being tax evaders and urging all Indians to switch to non-cash payment methods.
On Monday the government proposed introducing a penalty of 85 per cent on anyone caught with undeclared money, but said it would charge anyone who comes forward voluntarily a lower rate of 50 per cent.
Parliament has yet to approve the proposal, which is contained in an amendment to the existing tax laws.
* Agence France-Presse
