The scenes on the ground in India are ones of long, winding lines as people suffer upward of two-hour wait times in order to exchange their newly abolished 500 rupee ($7.60) and 1,000 rupee notes before the December 30 deadline.
The announcement of the currency swap came as a surprise to the Indian people when it was revealed on November 8 as part of a plan to crack down on “black money,” India’s term for their shadow economy.
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Since then, there has been a mad dash by Indians to quickly get rid of their soon-to-be worthless currency. But it’s not that simple. People can either exchange their notes for cash up to 4,500 rupees at the bank, where they are held up by lines. Or they could deposit their notes at the bank, where there is no limit, but they can only do this once. (Source: “India’s rupee crackdown sees money-changers ink-marked,” BBC, November 16, 2016.)
This is part of the Indian government’s attempt to crack down on tax evasion, but some critics point to those without bank accounts—mainly the lower classes—as suffering as a result of these changes. The bills that are being phased out account for about 86% of money in circulation.
Prime Minister Narendra Modi has tried to assuage some of that pain in his most recent plea for patience.
“This hardship is only for 50 days,” said Narendra Modi in a speech in Goa on Sunday. “Please, 50 days, just give me 50 days. After 30 December, I promise to show you the India that you have always wished for.” (Source: “India raises withdrawal limit as rupee anger mounts,” BBC, November 13, 2016.)
But where does gold fall into this chaos? As a writer at MarketWatch explains, gold has long been a steady tool for black money to become white money, with practitioners in the shadow economy buying small amounts of gold in order to launder that money. (Source: “Opinion: India, not Trump, is the real reason behind the crash in gold prices,” MarketWatch, November 15, 2016.)
Either way, this developing situation will be worth following as the impacts continue to resonate throughout both the Indian and world economy.
