Indians struggled to pay for basics goods like food and fuel on Wednesday and wondered how to get hold of their cash, after India suddenly withdrew 500 and 1,000 rupee notes from circulation in a bid to flush out money hidden from the tax man.
The shock measure also sent shudders through the investment community on a day when the markets were also reeling at the prospect of Republican candidate Donald Trump winning the U.S. election.
India’s National Stock Exchange share index slumped as much as 6.3 percent in early trade before recovering some of the losses by around noon
The currency move, announced late on Tuesday night by Prime Minister Narendra Modi, aims to bring billions of dollars worth of unaccounted wealth into the mainstream economy and curb corruption.
It was also designed to stop anti-India militants suspected of using fake 500 rupee notes to fund operations.
From midnight, the larger banknotes ceased to be legal tender for transactions other than exchanging them at banks for smaller notes.
Retailers refused to accept the bills, worth around $7.50 and $15 respectively, and people were unable to access ATMs after banks closed them down.
To be effective the move had to be unexpected, analysts said, but it was also fraught with problems for an economy largely fueled by cash, especially for India’s poorest citizens, many of whom work in the large rural economy.
India’s “black economy,” a term widely used to describe transactions that take place outside formal channels, amounted to around 20 percent of gross domestic product, according to investment firm Ambit.
New bills, of 500 and 2,000 rupees, will be introduced from Nov. 10.