Amid Panic Over Worthless Cash, Some In India See Opportunity
ARI SHAPIRO, HOST:
Experimenting with a country's whole economy is rare. That's what India's leader did back in November. Prime Minister Narendra Modi declared almost all of the cash in the country worthless overnight. Modi gave people six weeks to go to the bank and change their old bills out for newly issued ones. Part of the reason for this, Modi said, was to modernize India's economy, get people to stop using cash for everything and start using other forms of payment. It's been six months. Stacey Vanek Smith from our Planet Money podcast traveled to India to see if Modi's plan worked.
STACEY VANEK SMITH, BYLINE: When Modi made his announcement, India's entire economy ground to a halt. People stood in bank lines for hours in the sun. Some people died in line. Nobody could pay for anything, and millions of businesses went bankrupt. Rawinda Bhardwaj is 66. He owns a pharmacy stall in a market in New Delhi.
RAWINDA BHARDWAJ: I'm running my pharmacy shop here since - the last 35 years.
VANEK SMITH: Yeah, you have a lot of prescriptions, I'm seeing, all the way - all the way up to the ceiling.
Rawinda always used cash for everything. Credit cards made him kind of nervous. They didn't seem safe. But then Modi made almost all of the cash in India worthless, and Rawinda's customers needed their medicine. So Rawinda made himself learn new payment methods. He started taking credit cards and mobile payments from this service called Paytm.
Has it been good for business to take the cards?
BHARDWAJ: It's very good for business.
VANEK SMITH: Rawinda says about half of his customers pay with credit cards or Paytm now.
Oh, these are your receipts.
BHARDWAJ: Yes, receipts. This is all by credit card, by Paytm, by debit card, by check.
VANEK SMITH: This story played out all over India. Ninety percent of the business done in India is done in cash. And when the government kind of dropped this sledgehammer on the economy, it didn't offer any alternatives. For most of India. This, was devastating. Nobody had a way to pay for anything. But for Paytm, the mobile company, this was like the greatest gift ever; basically, a temporary monopoly. Madhur Deora is the CFO of Paytm.
MADHUR DEORA: Then we sort of jumped into action.
VANEK SMITH: Paytm wasn't exactly a household name, but after Modi made his announcement, the company saw a huge opportunity.
DEORA: So we had front-page ads in the next day's newspapers.
VANEK SMITH: A lot of the ads were just like, hey, we exist. You can pay for things with us. Other ads were kind of DIY instructions for businesses and customers.
DEORA: One of the ads that we did that we're quite proud of - a quarter of that page was a cutout, right? So we said you can really cut this out using a scissor and just fill in their name and their mobile number that they would put on the wall.
VANEK SMITH: Desperate businesses signed up in droves. Little roadside vegetable stands, hardware stores, taxis, even temples started letting people leave offerings with Paytm. Half a million people were signing up for Paytm every day. It was epic. A hundred twenty million Indians now used the service. Paytm is expanding to Canada, hiring thousands of people a month. And people like Rawinda Bhardwaj, the pharmacist, are not going back to cash. Rawinda likes that the payments are instant. He doesn't have to walk to the bank with a cash deposit every day. In fact, he's become such a convert, he has stopped using cash himself.
Oh, you don't use cash anymore.
BHARDWAJ: No, no, no, no need of that.
VANEK SMITH: Modi's economic experiment was a terrible trauma for millions of people. Paytm was one of India's clear winners - well, not India's exactly. Paytm is majority owned by Chinese mega company, Alibaba. So it turns out, one of the biggest winners from India's great economic experiment was China. Stacey Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.