Taking place in Bangalore India, the Worldly Mindset, the last module of the International Masters Program for Manager, began with the lighting the ceremonial lamp. To kick off the module, M.V. Rajeev Gowda, MP of Rajya Sabha for Karnataka and former IIMB professor gave a quick overview of India and in particular the Government’s recent demonetization policy.
On 8 November 2016, the Government of India announced the demonetization of all ₹500 (US$7.40) and ₹1,000 (US$15) banknotes, overnight these notes were worthless and withdrawn from the system. These bills accounted for 86% of the total bank notes in circulation.
Participants in the program had already felt the impact of this policy upon entering the country. Everyone was limited in the amount of money they could buy upon entering the country. Then when they did exchange their foreign currency they received 2000 Rupee notes. The problem with these notes only emerged when participants tried to buy goods or services and were told by retailers that they did not have enough small notes to give change for the larger notes. So on a relatively small scale the group was sensitised very quickly to the issue facing many Indians.
However, the bigger picture, as presented by Gowda, illustrates the impact that the policy has on many sectors within the Indian economy. Currently 86% of all transactions are cash – many sectors in the economy still work on a cash basis. Farmers, construction workers, textile, and small mom and pop shops are feeling the impact as these notes are taken out of the system. So if consumers cannot use cash at the small convenience stores they turn to the bigger retail outlets and a whole segment of owner operators are driven out of the labor market.
Not as evident is the impact the policy has had on a societal level. The effect on the very poor who rely on cash for daily living has not been studied. In addition, in a society where many women still only receive household spending money from their husbands, access to cash is key. For some the few rupees they have stashed away to be used in case of an emergency, are now worthless.
Slowly the impact of the Indian Government’s demonetization policy is being felt. The question is will the reaction to this far reaching policy bring about a larger reaction from civil society? Only time will tell.