Taking the “demon” out of demonetization : My demonetization experience in India

On the morning of November 9, 2016, I woke up in Manila to news that the 8,000 rupees in 500-rupee notes I’d stashed away had just become worthless slips of paper.  The day before that, the government of India had announced the demonetization of 500 and 1000 rupee notes as part of an ambitious plan to eradicate black money. Overnight, 87% of India’s currency in circulation had been deemed no longer legal tender. The deadline to exchange old bills for new ones was set to December 30, 2016.

But the government had not adequately prepared for the bold move. The new notes weren’t ready, and most ATMs had yet to be reconfigured for the change. Long queues at banks and ATMs and a shortage of new bills ensued. Many tourists were caught cashless in the middle of their trip, and merchants, big and small, suffered significant losses. On two instances, I was turned away at point-of-sale when the cashier couldn’t cobble up enough change for my 2000-rupee note.

How did I end up owning 8,000-rupees in 500-rupee notes in the Philippines, which is 2, 797 miles away? As what has been the family practice since Motito was born, friends and family would gift my boy with money before sending us off back to Manila.  With very little time to exchange the rupees for US dollars at a money changer and my aversion towards unreasonable exchange rates at the airport, I had often carried the notes to Manila and brought them back to India for use on our next visit. My son and I landed in Chennai on the wee hours of November 28, well ahead of the December 30 deadline for swapping my 500-rupee notes for crisp new bills. A daily exchange cap of 4,000 rupees meant that I had to make two trips to the bank to exchange my old bills for new 2000-rupee notes.

Not surprisingly, the critics quickly shot down the demonetization move for being poorly planned and executed, as well as being motivated by a rather simplistic rationale. Except for a few “small fry,” the audacious move to scrap the widely circulated notes failed to catch the big fish. What it did succeed in doing is compel many people to stop pussy-footing and join the cashless economy already. Interestingly, some quarters have questioned whether demonetization was actually a thinly veiled attempt to push the country into cashless economy territory.

So. embrace digital payments I did. I’d been using Uber and Ola Cabs for some time, and extending my cashless transactions to groceries, movie tickets, books, clothes, restaurants, and mobile recharges didn’t require a monumental leap of faith. E-wallet companies offered cash-backs and discounts that were too good for deal-hunters to resist. I signed up with PayTM because of its integration with Uber and the rebates it offered for PVR Cinemas and BookMyShow. Merchants quickly came onboard the cashless economy bandwagon; even the neighborhood pazhamudir cholai started accepting PayTM. It was amazing to behold how seamlessly everything worked when they did. Hiccups did occur occasionally, like transactions not going through, network connection being down, etc. But things went as expected, by and large.

In the Philippines, e-wallets like Globe and Smart remain confined to loads and person-to-person money transfer for transactions on auction sites or buy-and-sell portals like ebay and olx. Many Filipinos remain wary of using e-wallets for day-to-day transactions, but Globe and Smart can sweeten the deal with rebates and discounts. As a matter of fact, I’ve yet to open a digital wallet in the Philippines, because adoption by small businesses remain slow.

For many participants in the digital economy, cash is still king. Just ask the Ola and Uber drivers.