India’s shock decision to take high denomination notes out of circulation and impose curbs on daily bank withdrawals has badly hit economic activity in all sectors across the country.
The withdrawn 500 rupee and 1,000 rupee banknotes constituted nearly 85% of the paper money in a country where the use of plastic is low.
The ban was imposed in order to curb fake currency and unaccounted wealth, while Prime Minister Narendra Modi has made assurances that the government will sort out the cash crunch in 50 days.
But the confusion and anger continued on Tuesday with transportation one of the worst affected sectors. Trucks of various tonnage lumber along India’s expansive road network of 5.4 million kilometers to ensure that essential commodities and medicines reach the shop shelves of the remotest corners of the country.
According to financial daily Business Standard truck operators are unable to transport essential food items, including milk and vegetables, due to scarcity of smaller denomination currency. They are unable to buy diesel, pay wages, tolls and operational expenses such as for loading, unloading and in case of breakdowns.
The All India Motor Transport Congress said that curbs on withdrawals from banks had paralyzed the transport business.
The cash crunch has also affected agriculture, which employs nearly 56% of the country’s workforce and has entered the winter harvest season. Farmers are finding it difficult to bear the operational expenses of buying seeds and fertilizers.
They are also facing the loss of man hours, as many of them have to spend time in long queues at banks, which are often located far away from their homes.
According to the Hindustan Times more 500,000 workers employed in the tea and jute industries in West Bengal’s have not received any wages since last week’s demonetization.
Foreign tourists are also having trouble as vendors and ticket offices refuse to accept their high denomination currency notes and they have to depend solely on plastic.
Meanwhile digital wallet firms have lauded the decision as they see a good opportunity for growth. The CEO of the country’s largest digital wallet player Paytm tweeted: “Keep the money digital. Superb step by our dear PM @narendramodi. From a bit inconvenience to incredible bold step!”
Digital wallet firms claim they see a surge in interest among Indian consumers and retailers, especially in urban areas, for mobile wallet and debit card transactions.