Indian PM Narendra Modi faces his biggest electoral test since gaining power as the country’s most populous state, Uttar Pradesh, goes to the polls for a new state assembly.
Narendra Modi took Uttar Pradesh, which is home to over 200 million people, when he won the 2014 national election.
Uttar Pradesh election is being seen as a referendum on Narendra Modi’s decision to ban high value banknotes in India.
The move led to a cash shortage, hurting individuals and businesses.
Image source Reuters
The performance of Narendra Modi’s governing Hindu nationalist Bharatiya Janata Party (BJP) in Uttar Pradesh was important because it will be seen as an indicator for India’s national politics.
The move to scrap 500 ($7.60) and 1,000 rupee notes in November 2016 was intended to crack down on corruption and so-called black money or illegal cash holdings.
However, his government has admitted that the withdrawal of high value banknotes, which was met with shock in India, has had an “adverse impact” on the economy.
Narendra Modi has defended the decision, which he said was made in the interests of the poor.
The prime minister has personally led the campaigning for his party with the aim of encouraging a strong showing at the polls, which would strengthen his chances of a second term in 2019.
Uttar Pradesh voted overwhelmingly for Narendra Modi’s BJP in 2014.
Thousands of Indians have demonstrated in a number of cities against the government’s ban on two major currency notes.
Earlier this month, the 500 and 1,000 rupee notes were banned overnight, causing chaos as people lined up at banks to exchange their old currency.
India’s PM Narendra Modi has defended the decision saying it was an anti-corruption measure.
However, opposition parties say the move was mishandled.
Last week, they stalled parliament and demanded Narendra Modi should apologize for the decision.
Image source Reuters
Correspondents say it is unclear how much public momentum a day of protests will generate as many Indians have supported the move, despite the inconvenience it has caused them.
Most opposition parties said they would participate in the so-called “day of rage”.
A number of important regional leaders – like the chief ministers of Bihar and Orissa – refused to back the protests, saying Narendra Modi’s attempts to curb corruption should be welcomed.
Protest rallies have been held in the cities of Lucknow, Kolkata and Bangalore.
The southern state of Kerala and the eastern state of Tripura, both ruled by the Communists, saw a near total shutdown.
“We are protesting against the undeclared financial emergency imposed by the government and the hardships people across the country are facing because of this illegal decision,” Manish Tiwari of the Congress party told the AFP news agency.
“The decision to demonetize high-value currency was done without any authority and legislation and is clearly illegal.”
About 90% of India’s transactions are in cash and many people do not have a bank account. The two banned notes accounted for about 86% of the cash in circulation.
In his first national address since the government banned the notes, Narendra Modi called on November 27 for people to embrace digital payments and use less cash.
Last week, former PM Manmohan Singh said the government’s move to ban the much-used banknotes was “monumental mismanagement”, and that India’s gross domestic product would fall “by about 2%” because of the move.
Narendra Modi announced that 500 and 1,000 rupee notes were no longer legal tender as part of a crackdown on corruption on November 8.
There have been chaotic scenes in India ever since. People have spent hours queuing outside banks and cash machines which often run out of money.
In some instances the police have had to be called in to manage queues of anxious customers trying to access legal tender.
Indians have queued up outside banks across the country to exchange 500 and 1,000 rupee notes after they were withdrawn as part of anti-corruption measures.
People will be able to exchange their old notes, which stopped being legal tender at midnight on November 8, for new ones at banks until December 30.
The surprise move is part of a government crackdown on corruption and illegal cash holdings.
Banks were shut on November 9 to allow them enough time to stock new notes.
There are also limits on cash withdrawals from ATMs.
Image source The Hindu
There were chaotic scenes outside banks in Mumbai and Delhi.
Some banks extended working hours to deal with the rush, and have hired extra staff on a temporary basis.
Meanwhile, Indian social media has been talking of little else.
The top trend on Twitter India has been #CashCleanUp with tweets ranging from the frustrated to the humorous, as many people came to terms with the fact that much of their day would be spent in queues.
New 2,000 (about $30) and 500 rupee denomination notes with new security features are being given to people to replace those removed from circulation.
A new 1,000 rupee note “with a new dimension and design” will also be introduced in due course, a senior government official said on November 10.
The government’s move is designed to lock out money that is unaccounted for – known as “black money” – which may have been acquired corruptly, or is being withheld from the tax authorities.
Finance Secretary Shaktikant Das warned people with large amounts of hidden cash that banks would closely monitor the exchange of old notes for new ones.
According to the government, the move will flush out tax evaders and that all old notes deposited in banks will be subjected to tax laws.
According to Indian Finance Minister Arun Jaitley, “honest people” have no need to worry about a decision to withdraw 1,000 and 500 rupee notes from circulation.
Arun Jaitley said the move would flush out tax evaders, adding that all old notes deposited in banks would be subjected to tax laws.
The surprise move, announced on November 8, is part of a crackdown on corruption and illegal cash holdings.
The announcement was met with shock in India.
Media described the move variously as a “surgical strike” on tax evaders in India’s overwhelmingly cash-based economy and a “big bang note”. The banknotes declared illegal tender represent 85% of cash in circulation in India.
Image source Reuters
Arun Jaitley said that the move would also help India move towards a cashless economy, saying that farmers could “now keep their money in banks”.
He added that new 2,000 (about $30) and 500 rupee denomination notes to replace those removed from circulation would be injected into the economy over the next “three to four weeks”.
On November 8, there were long queues at ATMs as people tried to withdraw 100 rupee notes, which are still legal.
Banks and ATM machines were shut on November 9.
The most affected are likely to be small traders, vendors and laborers but newspapers were quick to point out that India’s wedding season, due to start in a few days, will also be hit hard.
“Black money and corruption are the biggest obstacles in eradicating poverty,” PM Narendra Modi said in his address to the nation on November 8.
The prime minister said the move would “cause some hardship” but asked people to “ignore” it, calling the step a “celebration of honesty”.
People will be able to exchange their old notes for new ones at banks over the next 50 days but they stopped being legal tender at midnight on November 8. There are also going to be limits on cash withdrawals from ATMs starting on November 10.
The move is designed to lock out money that is unaccounted for – known as “black money” – which may have been acquired corruptly, or be being withheld from the tax authorities.
Finance Secretary Shaktikant Das warned people with large amounts of hidden cash that banks would closely monitor the exchange of old notes for new ones.
The 500 and 1,000 rupee notes are the highest denomination notes in India and are extremely common in India. Airports, railway stations and hospitals will only accept them until November 11. People will be able to exchange their money at banks between November 10 and December 30.
Government guidelines say it is possible to exchange 4,000 rupees – but it is not clear if this is per day or in total. If there is a legitimate explanation for the cash, the authorities say, it will be possible to exchange it.
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