Since nothing notable happened in world politics this week, I thought I would tell you a little bit about what has been making news for us here in India lately.

On Tuesday evening (just as Americans were waking up and going to the polls) India’s Prime Minister, Narendra Modi, made a televised address where he announced that effective at midnight, all 500 and 1000 Rupee notes would be withdrawn from circulation. In Canadian terms this would be equivalent to eliminating $10 and $20 bills. India is a predominantly cash society and these two notes account for about 85% of the money in circulation. People will be able to cash these notes in at banks, with certain restrictions, until the end of the year, but as of 12:01 am, they would not be legal tender at any shops across the nation.

Various rationale for this seismic shock the financial system in India are being floated. It is being sold to the public as a way to root out terrorism financiers, counterfeit operations, and illicit drug activities. More than that though, it is a way to hit at the huge amount of black money which makes up India’s shadow economy which by various estimates may be equivalent to almost a quarter of the nation’s GDP.

When we arrived in India a few months back, there was a large moral suasion campaign being supported by the government encouraging all Indians to pay their taxes. For Canadians, this may seem a bit odd, but in India only about 10% of the population regularly pay their taxes. Huge amounts of transactions are also conducted in cash, off the books, including the paying of employees and the purchasing and selling of real estate, in order to avoid paying tax. There have been other government initiatives over the past two years since Modi was elected, encouraging people to register for government identification, supporting the opening of free bank accounts, and providing amnesty for the filing of back taxes, all in order to regulate the financial sector. The elimination of 500 and 1000 Rs. notes was just the next step in this process.

The government is stressing that anyone with a bank account will be able to deposit all of their old money in their account, and their will not be a problem. The catch is, that anyone depositing over 250,000 Rs. will come under the scrutiny of government auditors. If this money was lawfully obtained and all appropriate taxes were paid then all will be well. But for others who may not have properly accounted for their earnings in the past, things get a bit tricky. Black market money changers are currently offering 4 100 rupee bills for an old 1000 Rs. note. It is certainly a hard hit to someone’s pocketbook, but often seems more palatable than having to pay back taxes, plus a 200% fine.

To replace the old bills, new 500 and 2000 Rs notes are being introduced with improved security features to guard against counterfeiting, and in due course a new 1000 will also be placed into circulation. But in the meantime, there is a fair bit of chaos across the country.

The reality is that in the immediate term there just isn’t enough money to go around. Banks were closed on Wednesday to avoid panic, but even when they reopened on Thursday there was a limit on how much people could withdraw. Line up at banks are huge, and people’s tempers are growing short often having to wait in line for over 4 hours. Even then people without bank accounts are only allowed to trade in a maximum of 4000 Rs/day ($80) of old currency notes, banks across Mumbai are often closing early because they are running out of money. In rural areas where some two-thirds of India’s 1.3 billion people live, access to banks is often difficult and the situation is being viewed as increasingly dire.

For us, the financial reorganization is an inconvenience. I really have no desire to stand in line and bask in the heat for half a day so I don’t have a lot of spare cash on hand that I can spend. I do, however, have an Indian bank account and a debit card so I can pay anything I really need. Ordering vegetables from the little vendor down the street, whom I pay in cash, however, will have to wait and I will have to shop at the grocery store. It is further away and the produce isn’t as good, but such is life.

For many people without accounts and debit cards, however, life is much more difficult. Business for street vendors has almost ground to a halt. The streets are much clearer because there are fewer taxis on the road. Nobody has spare small bills to pay for cab rides, and many of the drivers don’t have enough small change to fill up their gas tanks. This short term pain will soon pass, and within a few weeks the amount of money in circulation will come up to meet people’s daily needs. Things will more or less get back to normal.

More troubling, however, are the stories that are dominating the news: A child dying because a father could not drive him to the hospital because they had no gas in their car and the gas attendant would not accept the old money; fights breaking out in line while people are waiting to get access to the banks; people dying of heart attacks from the stress and strain; and individuals committing suicide feeling that their financial future holds no hope. While economists generally agree that the government’s moves are the right ones and will overall be beneficial to the Indian economy as a whole, there are certainly some people who are getting caught in the middle.