ATMs in India are running dry, so why is the government still touting successful demonitisation?

Published: February 20, 2017

The goal of a digital, cashless economy has merit. PHOTO: PINTEREST.

Three months down the line, and India is still sifting through the mess created by Prime Minister Narendra Modi’s sudden announcement that he was pulling currency from the Indian economy. While the government promised that stability would return in 50 days and asked the people to support the authorities, things still seem shaky.

The government has been touting the success of demonetisation as ATM’s run dry and weak economic indicators are being reported. According to the Reserve Bank of India (RBI), money is still being counted and the picture is still a bit hazy as to how much of the returned money was counterfeit. RBI claims that it needs more time to sort through all pieces of returned currency before it can give an official figure.

Part of the new Indian budget indicates that about two thirds of the demonetised currency had been deposited back into banks within the government’s deposit deadline. Out of this, roughly half the amount had come back as deposits of more than 80 lakhs, which means that the depositors were able to defend the source of the money and were able to answer any tax related questions. The government had stipulated that deposits of over two lakhs would have to require an explanation from the depositor and be charged a penalty if they weren’t able to defend the source of the money and tax paid on the amount.

Additionally, RBI and official statistics from the Ministry of Finance indicate that manufacturing has fallen since the announcement of demonetisation. Arun Jaitley, the finance minister, is hopeful even though manufacturing had fallen in December due to the initial shock of demonetisation. He says that numbers should go back up in the following months. The government has remained vague over how or when the economy will regain its footing.

In fact, as Mr Modi and company have taken to the campaign trail, their speeches have indicated towards something much grander in the making. Digital India had been one of the main battle cries during Mr Modi’s election campaign and he seems to have merged the demonetisation narrative with the digitisation of the Indian economy.

As lofty as the claims may be, the Indian government is onto something. The goal of a digital, cashless economy has merit. For starters, it will bring the maximum amount of people into the financial fold, automate how payment transactions are held with the government, and allow for more transparency into the economy. Since demonetisation was broadcasted, one of India’s foremost digital payment firms, Paytm, has announced an uptick in its transactions.

The reasons for India’s massive underground economy and black money are due to the country’s weak rule of law and shaky government policies. Digitisation can serve to bring these sources into the tax bracket and allow for monitoring mechanisms. Furthermore, it can make services faster and more accessible to the common man while making benefactors more accountable for their transactions. In theory, this reduces the need for an informal sector of an economy.

The root of Mr Modi’s dream seems to have been tied with Aadhar. Aadhar is a unique identity number issued to each Indian resident and is based on a finger print and retina scan. The data is collected by the Unique Identification Authority of India (UIDAI). Aadhar was launched by the previous Indian government under Dr Manmohan Singh as well as under the leadership of Nandan Nilekani, co-founder of the Indian Business Process Outsourcing (BPO) giant Wipro. Essentially, the goal was to provide each Indian citizen with their own digital identity.

Within three years of Aadhar having been launched, 270 million accounts were opened that saw deposits of around $10 billion. Critics of Aadhar have argued that most of these accounts remained dormant until demonetisation was announced; however it created an infrastructure to cover the un-banked.

The grand plan, as it is being posed now, is to use one’s Aadhar number for payment transactions. With some technical innovations such as the launch of the India’s very own Unified Payments Interface (UPI), citizens will be allowed use their mobile numbers and Aadhar numbers for authentication and transmit payments to anyone with the UPI app. Not only will this allow for easy payments in lieu of cash, but it will also start building customer profiles and histories that will allow for the tracking of consumer credit.

Apparently, the current government shared its plans for demonetisation with its opposition in the parliament and apparently, the opposition admonished them and stated that the plan was too radical and would fall flat.

Maybe the government jumped into demonetisation too quickly and perhaps they should have started off with a campaign for digital currency before introducing demonetisation. For now, India will have to take their word in believing that this is only temporary and that this move will carry long-term benefits.

Muhammad Yamin

Muhammad Yamin

The author is a management consultant based in Toronto. He has a keen interest in international business, social enterprise development and application technology trends. He tweets @myamin325 (

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • Anoop

    The Govt has recognized the cash need is more in the villages and diverted more cash towards the villages. Cities are easily adopting Paytm, BHIM and other technologies seamlessly. 50 days has revolutionized digital payments scene.

    BHIM App is a wonderful initiative by the Modi Govt. Anyone can download it and use it for ease of sending money and receiving is unbelievable. Govt has rolled out *99# service, upon dialing of which, people will find banking has reached their mobile handsets!

    The naysayers said Demonetization has been a disaster and BJP will pay the price in UP elections. BJP is poised to win the state according to opinion polls. Time will tell.Recommend

  • Vips

    To many factual errors committed by this author in his haste to find a topic to diss or criticise Modi .
    i) Nandan Nilekani the architect of Aadhar was was not the co-founder of WIPRO. He is from Infosys.
    ii) Both Wipro and Infosys are not BPO firms they are full fledged IT Services company. Nice try by the author to reduce the blue chip companies to the level of just a BPO.
    iii) For the past 3-4 weeks the ATM machines are no longer running dry, the negative effects of the currency supply side has been addressed with new notes in circulation.
    Had the reverse been the case then Indian newspapers would still be carrying the reports of shortage of notes as they were doing earlier.
    iv) The author claims that “apparently” Modi had consulted the opposition on the demonetisation.The opposition parties are on record of not having been consulted on the demonetisation move by Modi. Had Modi consulted them then the move would no longer have been secret and thus would have defeated the purpose of banning the notes.

    If this is the level of half-baked research or study the “Management Consultant” does, then i shudder to think of the quality of services someone provides.Recommend

  • ab1990

    living in canada and writing. I go to the bank every alternate day and people are withdrawing cash as much as they want. ATM’s are running dry only in some areas. Not all. Please do your research properly and dont follow indian news mediaRecommend

  • Critical

    Oh a Pakistani sitting in Toronto with a management degree thinks he is the best to answer about the economics of India…

    First of all,the ATM Shortage was only for a short time and it has been rectified..

    The main aim of demonitization is to make people use digital transactions more and curb the cash transactions which are untraceable… Even among cash transaction, you need to provide PAN card for higher amounts…

    The more money comes under scrutiny,the more tax we get and the tax money can be used for our betterment….

    Being in Canada, I’m sure you would have swiped your debit/credit card atleast 10 times this morning instead of carrying cash all around..thats the economy Modi wants to buildRecommend

  • Kulbhushan Yadav

    When 86% of currency is not legal tender, there was bound to be a shock to economy. However it is in short term, could be few months. The new currency notes are coming at a good pace and situation has eased out in most places. Moreover, govt has started biometric based payment system where one does not need any sort of device. One just has to provide finger scan at shop to make payment, provided Aadhaar is linked to bank account. If successful, India would be the one of the few countries to have that.Not only that, a new eco system is developing in India for digital payment with so many new apps which in turn are providing employment opportunities. Few years down the line, digital payment would be a new normal in India in most places so much so for that govt pay even abolish currency notes altogether.Recommend

  • Rahul

    Cash economies are mostly dominated by family businesses as cash is Anonymous,easy to pilfer and easy to hoard. When you are not paying taxes, you cannot trust anybody outside the immediate family. Illicit cash cannot be invested legally to grow the business. The businesses fail to grow and after a few years there is usually a family feud over the division of assets, income and labor. the Business usually disappears after 1 generation. In western countries a cash less society developed naturally through corporatization and big business. Even there all crime has its basis in cash such as tax fraud, drugs,vice, illegal immigration etc. India is trying to help this natural process along because it sees big benefits for the economy.Recommend

  • Hidayat Rizvi

    Demonetisation hoax explained: Bhartiya Danga Party’s union Danga financier and ugly bald Dangai voodoo economist Arun Jetlay came out of hiding from an unknown location and want to tell benefits of note ban hoax, yes Ofcourse but with a small caveat though, with a gun on people’s head, after taking all their money and disposing of his own money. That’s how he roll, so gangsta. PM Modi then wants to jump to a podium and do name calling and mudslinging. Yes Ofcourse but with a small caveat though, he want to do this with his signature bizzare hand gestures. Biggest name calla and biggest mud slinga. He then wants to seize all black money, yes Ofcourse with a small caveat though, he wants to do this by short cut of demonetisation. Biggest hoax pulla. PM Modi then wants to pour cow mutra down people’s throat and apply cow gober on people’s face for best shade results. He then wants people to buy patanjali product only using digital transaction, yes Ofcourse with a small caveat though, with a gun on people’s head.Recommend

  • Nomad1412

    As an Indian, my perspective is contrary to that of the blogger. Before anyone accuses me of bias, let me state that I am from a minority community and did not vote for Modi’s party in the last election.

    “The government has been touting the success of demonetisation as ATM’s run dry and weak economic indicators are being reported.”

    Government is touting that it has fought against black money. RBI has not released any numbers yet, so how can the government claim success even if it wanted to? ATMs are not dry at all. Economic indicators were expected to dip for about a year, but it lasted less than a quarter.

    “According to the Reserve Bank of India (RBI), money is still being counted and the picture is still a bit hazy as to how much of the returned money was counterfeit.”

    Modi said recently in parliament that we shall never know how much fake currency existed as only those who printed the fake currency would know for sure. RBI is well within its rights to take as much time as it needs to give an accurate figure. In India, the RBI is an independent institution.

    “Out of this, roughly half the amount had come back as deposits of more than 80 lakhs, which means that the depositors were able to defend the source of the money and were able to answer any tax related questions.”

    Nope, all it means that is that the cash was deposited after verifying their identity. They have until end of March to disclose this income after which the tax-man will come knocking on their doors. Every single large-denomination currency note in India has been either disposed off or converted through the banking system, there now exists a trail for government to follow.

    “The root of Mr Modi’s dream seems to have been tied with Aadhar.”

    Full credit to Modi for persevering with Aadhar. The previous NDA government had launched a similar scheme which UPA had scrapped, it is good that the current government has been pragmatic.

    “Apparently, the current government shared its plans for demonetisation with its opposition in the parliament and apparently, the opposition admonished them and stated that the plan was too radical and would fall flat.”

    Congress is tainted by numerous scams and has lost credibility. TMC involved in numerous chit-fund scams is crying hoarse, but no one in India cares about a CM of a state that has grown more and more irrelevant. Right now the bigger problem is that the opposition has zero credibility.Recommend

  • goyaaka goiyaale

    you sir seriously need to come to india and then talk, the atms were dry 2 months ago…now there is no shortage of cash anywhere. Quit your false propoganda.Recommend

  • Milind A

    Another ill-informed writeup… The note crunch was expected to last 6 months, however within 2 months, all ATMs started having cash, though there were limits on these.
    Also what about the success BJP got in the civic polls during and after demonetisation? Just last week BJP received the 2nd last no of seats in Odisha (where it had only 1 or 2 seats). What about the raids on goldsmiths, IT evaders, hoarders, doctors and builders with black money? I know these kind of raids are not possible against the high and mighty in Pakistan, but outside Pakistan, these things do happen. So don’t get insecure and try to run down initiatives by Modi – digital India, demonetisation…Recommend

  • abc

    Which ATM is dry, boss? Unlike you, I actually live in India. Haven’t had any issues with ATMs since December.Recommend

  • Milford

    You have no idea what you are talking about. At least be brave admit it you dont know what you are spewing here. So many factual errors.Recommend

  • sac_nair

    So much angst…! Must be giving you sleepless nights. Strange this guy got crores of people to vote for him. Thought it must be one time based on some propaganda but then many states voted again.
    he managed to get USD 40 billion in FDI. Gobar application found sense and Patanjali became a 5000 crore company.
    If the minority is 15% of population- why are there not enough schools by them? Christian community is just 1.8% but look at the institutions it has created- schools to colleges to orphanages. But did you know India has the highest number of mosques in the world- 4 lakh!
    Why then we don’t find enough MBAs, Doctors, Engineers, Govt servants, IT professionals, teachers, professsors, bankers in proportion to the share in population. You may say conspiracy- but how long can someone conspire. So much angst was not visible when there was 2G scam, Coal scam, Commonwealth scam, Augusta scam. Suddenly so much !
    Crores of people have faith in him. The day that faith is lost he will not hold that post. Remember that we never had a military dictator rule anytime in history… That is based on this philosophy- once someone is elected- support them. The time for decision will come and if you dont like vote him out. Hurling abuses only destroys self. And trust crores of common man- their combined intelligence is much more than you as an individual.Recommend

  • Shakir Lakhani

    If the BJP wins in UP, it will not be because of the so-called “success” of its demonetization policy, but because many Hindus will vote for it (because they believe the Muslims are anti-BJP). Secondly, unless it stops printing and distributing currency notes entirely (which is impossible), there will always be black money.Recommend

  • Paki Terrorist

    The ATM s are running dry in India … ??!! … who gave you this information, based on which you can find space in the media for your rubbish … ??!!Recommend

  • Patwari

    Looks like the hindus are out in full force on this blog.
    Modi Sarkar can do no wrong. He even has temples
    and shrines dedicated to him. In Delhi, Gujrat, Maharashtra…..
    The Vermillon Lord,…. Shining Hindustan.Recommend

  • Sane

    Modi has miserably failed in all sectors. Recommend

  • Sane

    Why reality and facts make you enraged. This is reality that Indians are in most difficult situation ever faced by them in history. India is decaying rapidly. Main cause is Modi.Recommend

  • pure ind

    Sane I usually read your comments they always lack facts only meaningless rants, guess your a school kid playing with an elders laptop. Grow up,Recommend

  • pure ind

    Mohammad Yamin hope that you also read the comments on your article, buddy very poor research no facts guess some comments have proved how wrong you are, don’t take to heart one can always improve all the best.Recommend

  • ab1990

    modi sarkar can do no wrong but nawaz sarkar can do everything wrong looking at the recent blasts at lahore. Your country is a joke!Recommend

  • Paki Terrorist

    If India was in decay, the business community of the entire world would not line up to meet PM Modi with business proposals. … stop reading your Paki media lies and misinformation … !!Recommend

  • Sane

    Fact in your dictionary is propaganda and lies. By the way; thank you for reading my comments.Recommend

  • Pure ind

    Don’t thank me guess some good sense gets into you.Recommend

  • Patwari

    “I go to the bank every alternate day”…huh?…wha?
    Every other day? Why would you be going there every
    other day? Because the ATM’s are dry!!! Because there is
    no money in the bank too. It’s bone dry. Dust swirling in the cashiers
    cubicles, and the main safe has cobwebs..That is why you go
    every alternate day, praying that just maybe…maybe you might get
    lucky and get some hindu currenct. So far, no luck. Keep trying.
    Modi Sarkar will ‘hep’ ya’ll and ‘hep’ you some more. Ya’ll gone
    be good now.
    The Saffron Lord,…. Rising.Recommend

  • Sane

    Thank you nonce again.Recommend

  • ab1990

    i work in accounts department of my company. I have work at the bank. We dont withdraw money. We buy demand drafts and drop chques time to time. people like u dont understandRecommend

  • Kulbhushan Yadav

    If Hindus would have been voting for “Anti-Muslim” party in UP, then current Samajwadi part would not have been ruling UP. Why Pakistanis are so gullible and unaware?? Recommend

  • Dinkan, the true god

    level of an expert!! lol.Recommend

  • Dinkan, the true god

    says a paki about Indians!!!
    level of paki!!!Recommend

  • gp65

    Cash shortage was true in November and December. Not in February as any number of Indians have confirmed in their comments. Referring to outdated facts to make an argument, simply makes the argument flawed.Recommend