Russian Embassy protests demonetization difficulties
Weeks after the sudden withdrawal of high denomination Indian currency from the country, Russia has lodged a protest over cash shortages, saying it was affecting the functioning of its embassy in New Delhi, All India Radio news service said late Tuesday.
Russian Ambassador Alexander Kadakin has written a letter asking the Indian Ministry of External Affairs (MEA) to intervene to get restrictions on cash withdrawals by Russian Diplomats lifted. He has written to the ministry that the embassy's normal functioning is getting impacted, with the inadequate amount limit of 50,000 rupees per week.
Senior Russian embassy officials in New Delhi said that they hope the issue is resolved quickly. A senior Indian official confirmed to RIR that the MEA had received a letter from the Russian Ambassador.
It has been a month since Indian Prime Minister Narendra Modi made a sudden, surprise announcement, on the evening of November 8, to demonetize high denomination currency notes of 500 rupees and 1000 rupees, making them illegal overnight. His professed aim for suddenly removing around 85 per cent of the money in circulation in the country was to tackle corruption by wiping out black money and to curb terrorism by cutting off funding.
While everyone across the country welcomed the intentions, nobody, including the government, fully realised the extent of disruption and dislocation the measure has caused. Endlessly long queues of people have appeared overnight in front of banks and ATMs, with tempers getting frayed as time passed, because there is just not enough newly minted currency in circulation.
Like ordinary Indians, all diplomatic missions have been hit, because all banks are receiving a very limited supply of currency notes to supply customers. The government has added to the problems by making adjustments to how much can be deposited and how much cash can be withdrawn almost on a daily basis. Diplomatic missions can now withdraw up to 50,000 rupees in cash every week, which is not adequate to carry out normal, routine work.
Asked whether they had received lots of complaints from diplomats and embassies, a senior official told RIR that they had been “inundated” with complaints and diplomats seeking exemption from the limits. However, given the fact that there is a very limited money supply, there is little the MEA can do.
“There are no conventions (like the Geneva Conventions or the Vienna Conventions which guide diplomatic exchanges) to cover this problem,” a senior official told RIR wryly.
MEA spokesman Vikas Swarup said, “The government has set up an Inter-Ministerial Task Force which also has a representative from MEA. The Task Force has formulated a set of recommendations. These recommendations are currently under review by the Department of Economic Affairs and as soon as we have a decision from them, we will be in a position to communicate this.”
“The Inter-Ministerial task force has been set up to look into the other issues faced by foreigners, foreign tourists, by diplomatic missions, by people coming for medical tourisms and things like that. So that task force is also meeting regularly and we await their recommendations,” said Swarup.
In the case of the specific complaint by the Russian Ambassador, the MEA has informed the envoy that it has approached the Ministry of Finance Department of Economic Affairs over the issues and is awaiting a decision by the Finance Ministry regarding it.
According to a report in the Economic Times newspaper, which claims to have seen the Russian Ambassador’s letter, dated December 2, Ambassador Kadakin said that the “restrictions on withdrawal of cash had severely affected the New Delhi Embassy’s functioning as the withdrawal limit was not even enough to pay for a decent dinner in a restaurant’.
“Please just imagine if we in Moscow mirror this order of SBI (State Bank of India) when 50,000 roubles will not be enough to pay for a decent dinner in a restaurant, not to mention functioning of such a big embassy as ours in New Delhi or India’s in Moscow,” the letter reads.
“SBI informed the Embassy that the cash withdrawal limit available to the Embassy is now Rs 50,000 per week under the government of India directives with no exceptions unless otherwise advised by the RBI. Such an amount is totally inadequate as regards the embassy’s salary and operational expenditure requirements,” he wrote.
The ET report further mentioned that the Russian embassy has staff strength of 200 (excluding family members) and with the new withdrawal limit the cash at hand for one person comes to Rs 250 a week.
Senior diplomats from the Japanese embassy told RIR they, too, were facing considerable problems just for routine working.
A senior diplomat said they were watching the situation closely, and were getting negative feedback from investors and businesses, wishing to do business in India. While it is too early to have an impact assessment, foreign ratings agencies like Moody’s and Fitch are saying India’s GDP growth is likely to fall by one percentage point, from 7.3 per cent to 6.5 per cent or lower.
Former Prime Minister Manmohan Singh, an eminent economist, criticised the demonetization move, saying the economy would take a huge hit, with growth figures falling by two per cent.
The Reserve Bank of India (equivalent to the Central Bank in Russia), which controls currency printing has not managed to print adequate amounts of currency, because the capacity for suddenly printing huge amounts of paper currency is limited. And, because the newly issued 500 rupees and the new 2000 rupees notes are a different size, every ATM in the country has had to be re-calibrated.
A senior banker told RIR that the process of upgrading all the country’s 104,500 ATMs (Automated Teller Machines) could take up to three months. Adding to the confusion and the large crowds at banks is the fact that ATMs are not working.
In India, this is the peak tourist season, the peak wedding season and the peak crop sowing season. The cash crunch has hit everybody and, while the queues are certainly getting shorter, nobody appears quite sure or has answers to when the problem of currency shortage will ease.