Indian Prime Minister Narendra Modi has scrapped 500 and 1,000 rupee banknotes as part of a crackdown on rampant corruption and counterfeiting.
The surprise move was designed to bring billions of dollars worth of cash in unaccounted wealth into the mainstream economy, as well as hit the finances of militants who target India and are suspected of using fake 500 rupee notes to fund operations, Reuters reports.
“Black money and corruption are the biggest obstacles in eradicating poverty,” Modi said in a hastily convened address to the nation after a cabinet meeting.
Nearly 40 percent of India’s economy is driven by small and medium-sized enterprises that largely run on cash transactions. Economists said the move could impact these businesses, and in turn have a knock-on effect on economic growth.
There was concern among members of the public about changing larger denomination banknotes for new ones once they expired.
About a dozen people lined up to use an ICICI cash deposit machine in suburban Mumbai soon after the announcement, trying to deposit bundles of 500 and 1,000 rupee notes.
The machine stopped working after 10 minutes. Only two customers managed to deposit their money, and a security guard informed the rest that the cash dispenser has reached its limit and would not accept any more.
Delhi taxi driver Anu Choudhury said his boss called to say he should not accept 500 or 1,000 rupee notes from customers.
“This is not a good step for business. The prime minister did not think about people like us.”
A report by Washington-based think-tank Global Financial Integrity estimated that India lost US$344 billion in illicit fund outflows between 2002 and 2011.
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