On the evening of November 8, as many in the U.S were anxiously watching the election results unfold, Indian Prime Minister Narendra Modi addressed his nation in an unscheduled televised address. He announced that the 500 and 1,000 rupee currency notes would no longer be legal tender, effective at midnight. This announcement gave the Indian public a four hour notice before eighty-six percent of the cash circulating in India became “worthless scraps of paper.” This drastic decision was implemented to crack down on corruption and illegal cash holdings known as “black money.”
In disbelief, large crowds flocked to banks and ATMs to withdraw cash or exchange the old notes. Increasingly lengthy lines surrounded banks and police have occasionally been called in to calm crowds. People have had until November 24 to change sums of old cash into legal tender as long as they produce ID, which is held by ninety-three percent of the population. However, rules on what and how to change money are evolving as the government reacts to the crisis.
Recently, India’s government has faced much criticism for its “poorly planned execution of the nationwide demonetization.” Unsurprisingly, four hours did not provide families enough time to get their finances in order and new currency notes quickly ran out. Short on cash, buying essential items such as milk and bread has become difficult.
India’s cash economy relies on two overarching problems: middle and upper-class earners accept cash payments to avoid paying income tax, while those at the bottom of the pyramid lack access to financial institutions. These problems have exacerbated the effects of this currency ban and exposed one of its most pervasive problems: the exclusion of women from the formal banking sector.
Demonetization disproportionately affects women because women are the “cornerstone of the cash economy," says Ranjana Kumari, director of the Center for Social Research in New Delhi. "They are the ones who are forced out of traditional banking because that is typically a role held by the man of the house." Financial inclusion and gender inequality are often intertwined and women’s financial problems stretch back decades.
Before credit cards and saving accounts, women commonly protected their personal wealth through jewelry. “Money was passed and saved through nose rings, gold bangles and precious stone earrings.” When faced with a cash emergency, women could pawn jewelry for immediate cash. This tradition is still prevalent in poorer women today. Only thirty-two percent of women have formal bank accounts, while others store cash in safe places or as jewelry. Kumari states, “Whatever income poor women get, they spend it on their family and then save a small amount of cash in their home, away from their husbands.” This cash may come from daily wages or small amounts from their spouses. Daily expenses keep these families from accumulating a substantial amount of cash. Moreover, an emergency could wipe out family’s life savings due to lack of access to financial institutions.
While Modi claims the currency ban target is the “black money” hidden by the elite classes, many of the disenfranchised are severely impacted, as well. Unfortunately, disenfranchised women are bearing the brunt of the burden.
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