On a smoggy November day in New Delhi, Suresh Singh waited with his entire family in a mile-long queue at an ATM machine. His daughter, Geeta, was getting married in five days and the family needed to withdraw roughly $10,000 to pay for wedding expenses. But there was a daily withdrawal limit of 2,500 rupees ($38.50) per person. Suresh had already been waiting for over five hours.
A week before, the government of Prime Minister Narendra Modi had announced, on the evening of November 8, that it would be taking all 500- and 1,000-rupee notes (about $7.64 and $15.28 respectively) out of circulation the next morning, in an attempt to rid the Indian economy of black money and tackle tax avoidance, corruption, fake currency, and terrorist financing. Modi hoped that in the long term demonetization would turn the largely cash-driven Indian economy into a cashless one. In India, the ratio of cash to GDP is one of the highest in the world at 12 percent in 2014, compared with nine percent in China or four percent in Brazil. Less than five percent of all payments are made electronically.
As a result of demonetization, an estimated 86 percent of the total cash in India’s economy was taken out of circulation, leading to an acute shortage. Modi’s announcement triggered a mad rush to the banks as people tried to deposit notes that had been made defunct and to withdraw new currency that was already in short supply. Only three denominations remained in circulation: 100-rupee, 50-rupee, and 20-rupee notes, equivalent to $1.40, $0.80, and $0.30, respectively. Lines could stretch for miles. Some people fainted because of the long wait in the heat, and a few even died.
One unforeseen victim of demonetization, which was enforced just a few days before the beginning of the auspicious Hindu wedding season known as shukla paksha, was the wedding industry. It is estimated to be worth $14.5 billion and growing at 25 to 30 percent annually—and it is largely run on cash. The wedding industry is unregulated and consists of
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