India cancels high-denomination banknotes

According to media reports, the prime minister of India, Narendra Modi announced that the government would remove 500 and 1,000 rupee notes (approximately £6 and £12) from circulation on November 8. It is reported that people have until the end of 2016 to turn in the high-denomination rupee notes and there is no need to hurry in order to exchange them, however, there was panic in the market as of yesterday.

Media reports noted that people could only get cash from the banks due to closed ATMs and that businesses declined to take 500 and 1,000 rupee notes in many place such as train stations, taxis, shops and even hospitals.

After the sudden withdrawal of the high-value notes from circulation, implemented for the purpose of combatting corruption, black-market trade and tax evasion, many Indians who faced cash flow problems panicked and waited in long bank queues to exchange their high-value banknotes.

According to analysts, the Indian economy may be badly influenced by the sudden withdrawal for the near term. However, this move would cut corruption and increase the financing of the government. Therefore, they believe that the move will be positive at the end. The rise in inflation is expected to be prevented via reducing property prices on a large scale.

A source from a domestic petrochemical producer commented, “The government’s sudden decision has created chaos in the market. Banks were closed for two days while withdrawal amounts were limited at ATMs. This means that players returned from the Diwali holidays with no money to spend. Demand was expected to pick up after the holidays, yet the post-holiday activity is disappointing as everything has slowed down.”