Queues at banks and ATM kiosks are shrinking and digital payment modes are spreading, but the 50 days of pain from the shock recall of two high-value banknotes is set to linger into the new year, experts warned on Wednesday.
Prime Minister Narendra Modi, after announcing the demonetisation drive on November 8, had cautioned that people would face temporary hardship and sought their cooperation: “...help me for 50 days and I will give you the India you desired.”
But don’t expect to wake up on Thursday, the 51st day of the announcement, for the situation to be back to pre-demonetisation times, said experts and bank officials.
“Though the situation has improved, the cash crunch will continue for some more time ... it is expected to normalise in the second half of January,” said Soumya Kanti Ghosh, the chief economic adviser of the State Bank of India.
Even then, the normality is expected to return incrementally as limits on cash withdrawal could continue till banks are comfortable with lifting the restrictions.
The government promised to restore normality by December 30, when a deadline to deposit defunct notes expires. But uncertainty and confusion continues even 50 days after 500- and 1,000-rupee notes were scrapped in an attempt to curb tax evasion and counterfeiting.
The drive enjoyed popular support at first but public patience wore thin as the continuing cash crunch forced millions to queue at banks and ATMs for hours to draw money. Sources said only about 60% of the more than 200,000 ATMs in the country were working as of Wednesday.
Bankers expect chaos in the coming payday as well because of shortage of new notes. Of the 560 million people working in factories in India, a mere 10% is in the organised sector, where salaries are transferred electronically into bank accounts.
Cash withdrawal limits have not been raised or withdrawn. While Rs 15 lakh crore has been sucked out of the system, only about Rs 6.5 lakh crore has come in, leading to a demand-supply mismatch.
The government’s push for lesser cash transactions has boosted digital payments platforms, but the misery continues, especially in the rural areas.
Think-tanks have lowered their growth projections for the country and people fear that demonetisation will shave off 100 basis points from the GDP growth.
“Unless fundamental steps are taken to prevent creation of black money, demonetisation alone will not help … Further, this measure has totally upset the common people who are using the Rs 500 and 1,000 notes in their normal life,” the All India Banks Employees Association said.
Rules have been changed as many as 62 times in the past 50 days, piling on the confusion and attracting taunts from the Opposition and on social media.
“There is need to maintain stability and you cannot keep changing rules every now and then ... this leads to erosion of faith in the system and if the situation is not corrected at the earliest, things can go out of hand ,” said a senior public sector bank official who refused to be identified.
A set of rules was announced on November 8 just after the announcement of the demonetisation exercise. The government set a limit of Rs 4,000 for exchange of old banknotes. Within days, the government introduced the indelible ink to ensure that people could not queue up again and again to exchange cash. Soon, the government decided to disallow exchange of cash altogether.