Dispatch, India: Tourists become victims of currency crisis

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Residents of Kolkata try to redeem their old rupees for new bills. It could take hours to get a small amount.
Residents of Kolkata try to redeem their old rupees for new bills. It could take hours to get a small amount. Photo Credit: Sarah Mawdsley

IMPHAL, India -- Landing in New Delhi, my wife and I anticipated that the wedding of our younger son, Rob, in India's far northeast would be full of cultural surprises. But a more immediate revelation came via a note slipped under our hotel door early the next morning: The rupees we'd bought at the airport were suddenly obsolete per a snap demonetization by the Indian government.

Faced with oceans of unreported "black money," the government had stunned the country by declaring on Nov. 8 that all 500- and 1,000-rupee notes (about $7.50 and $15, respectively) would need to be exchanged for new bills. Suddenly, 86% of Indian money, by value, was technically invalid. Strict daily swap limits and lack of replacement currency created a still-evolving cash crunch.

(Editor's note: Black money is not counterfeit but rather legal cash earned through illegal activity. Recipients of black money must hide it, spend it in an underground economy or attempt to launder it.)

For us, Delhi was just a pit stop on a five-flight odyssey to Imphal, in the state of Manipur. The JW Marriott Hotel New Delhi Aerocity had no problem with my credit card, but from there, it was fiscally downhill.

As of last Thursday, international travelers could exchange up to 5,000 rupees of old greenish-yellow and red-colored Gandhi Series notes per week at international airport counters with transactions subsequently recorded in travelers' passports. But the currency booth at the regional Imphal airport was closed when we arrived two planes later.

Bigger airports were hardly better. Businesswoman-on-sabbatical Sarah Mawdsley landed in Kolkata from England on Nov. 13, en route to Varanasi. A "huge queue" in the arrivals hall led her to an open exchange outside, and a significantly discounted rate. "I don't need to tell you that they were totally ripping off the tourists," she said. "Queues for the ATM were huge, but worse than that, there actually was no cash in the ATMs. I queued for more than one hour on the first day."

Taking meals in hotels where credit cards could be used was "quite an expensive option," and a neighborhood bar lacked beer because it couldn't pay the supplier. As Mawdsley pointed out, "The cost to local business is huge."

The whole country seemingly spiraled into currency shock. The tourist allowance rose from an initial 2,000 rupees a day, but new bills were scarce, and ATMs initially weren't configured for the new, larger 2,000-rupee bill. ATM lines in Imphal's market area stretched down the block and around the corner. The Hindustan Times reported that residents in Rajasthan were treated to the irony of young tourists from Germany, Australia and France playing music and performing on the streets, their signs reading "You can help us" and "Money problem."

More seriously, an estimated 70 deaths associated with withdrawal hardships within two weeks of the currency announcement were cited by the Press Trust of India. Causes ranged from exhaustion while standing in long queues to suicide. The deceased included 11 bank employees and children who reportedly died after hospitals, ambulances and auto rickshaws refused to accept the old notes.

American tour operators reported various adjustments to the disruption. Packages such as those offered by Insight Vacations are prepaid, so the callback "does not affect us," public relations vice president Arnelle Kendall said.

G Adventures' prices remained stable, but the local office "advised our customer-service group that the rupee decommissioning would be an issue for approximately three weeks following the announcement," reported Kim McCabe, the operator's U.S. public relations strategist.    

Rob Ferguson, a Hong Kong-based nongovernmental organization development director and photographer touring on a package with his OB-GYN wife via Nature Safari India, was caught in the currency buzzsaw.

"We were lucky, as we were in the jungle, where all expenses [except tips] were prepaid, so not too badly affected there," he said. Then came the rupee revocation.

"As we got to Delhi, it was terrible," he recalled. "We had 20,000 rupees in 500 notes [about $300] that were 'illegal' to use, and nobody would accept them. Suddenly, we had no money. None! Worse was there was no way of getting any. No one could help. Bank queues were five hours long, with no guarantee. ... So no money for a taxi, no money to get to the airport, no money for food.

"We were lucky we only had one day in Delhi, and we had hired a car previously," he said. "We went to the national museum and paid with a credit card. We went to the museum of modern art and were turned away, as we could not pay."

As for our group, across the five cities we would visit, a proliferation of stationery-sized signs warned that recalled bills would not be accepted, resulting in repeated turn-downs at souvenir stands, roadside dhaba restaurants, etc. It became hard to break bigger bills to tip bellmen, maids and other working people, who themselves were stuck.

Kerry Bajaj, who moved to Mumbai from New York in October, also witnessed the locals' problem: "Our cook was able to get money changed, but the new currency is 2,000-rupee notes, which is quite a big bill. She takes a rickshaw to get to work, and none of the rickshaw drivers have change."

As of Nov. 18, cash exchange for locals was reduced from 4,500 to 2,000 rupees a day, and as of Nov. 25, old-series, larger-denomination bills could only be deposited at banks rather than exchanged. By the end of the year, the old bills will be worthless.

Cat-and-mouse workarounds arose, with a surge in booking-then-cashing-in railway tickets (a practice now blocked), and a run-up in gold prices. For us, an unlikely source of walking-around money came from my son's Hindu ceremony, during which honored males, including the groom's father, aka me, received usable, small bills from the congregates.

Son Rob, fortified by cash wedding presents of varying denominations, successfully off-loaded "old money" to settle a hotel bill only because Oinam, his feisty, locally born bride, noted the size of the wedding party and dropped the right names.

Moving to Guwahati, a larger city, we began a week of celebratory touring. Recalled Alex Rubin, a Chicago-based business development executive and friend of the groom: "I went on a walk in Guwahati looking for an ATM, and all were either shuttered or out of service. And even if they worked, the maximum withdrawal would have been around $33, and I would have had a $5 charge from my bank. Loan sharks offer better fees."

At the Kaziranga National Park rhino sanctuary in Assam, old bills were accepted for park fees. A flesh-and-blood tank crossed the road just feet behind our bush truck, and a sunrise elephant ride in the tall grass was fabulous. But the system at our package-booked, fairly posh hotel was unable to process three different credit cards, which would have left us hanging had it not been for what we were now calling "The Bank of Rob."

Settling a tab for lunches, drinks and gift shop items, we stepped away while Oinam's Hindi harangue convinced the desk staff that it was on them, not her, to stand in line with old bills if they wanted to get paid.

By Thanksgiving, a full-service operator such as Abercrombie & Kent India could voice hope that things were settling down. A&K spokeswoman Jean Fawcett said, "There is shortage of new currency without any doubt, but ... all our guests' arrangements are prebooked, which means they don't really require currency usage, with the exception for tipping and possibly shopping."

As for a resolution, Fawcett said she was hopeful that by the end of November "the new currency will be available in free supply for further easing of day-to-day transactions. We are advising our guests to carry smaller denominations of U.S. currency ($1, $5, $10 and $20), as these can be used for tipping, if required. And also, smaller denominations are easy to exchange at the hotel exchange counter if they have new currency available."

Rob Ferguson was lucky: Just before he left, his agent was able to convert his soon-to-be-useless rupees into dollars.

By our Nov. 20 departure, son Rob could access his bank account via an ATM at the Guwahati airport (but only after two locals maxed out some dozen bank cards as those behind them fumed).

By then, we'd off-loaded most of our old rupees, which proved to be a good move. "Currently, nobody is going to buy those notes anywhere in the world, except the banks in India," Vipul Kapadia of Castro Valley, Calif.-based Currency World USA, told India-West. Kathryn Ellis, a company spokesperson for my bank, Wells Fargo, said after our return, "We will reintroduce the new notes at an appropriate time."

We did have a final transaction before starting our homeward journey. Driving in India is an exercise in vehicular chicken, and our two chauffeurs had been terrific at navigating in traffic, around cows and over roller-coaster roads for a week. So it was with mixed feelings that I gave them handsome tips in the condemned money. I was pushing the luggage trolley before they could unfold the bills.

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