Moreover, thousands of veteran Gurkhas drawing pensions in Indian rupees have seen their payments undermined. Alongside migrant workers, Nepalese students seeking admission to Indian institutions, those seeking medical treatment, pilgrims, and those visiting family in India are also affected.
He is in a situation shared by hundreds of thousands of others now unable to deposit their Indian earnings in Nepalese banks, as said banks no longer recognized the defunct bills. Pandey, who attempted to deposit $440 worth of rupees, only to be refused, is now unable to repay a $275 loan used to rebuild the family home after the 2015 earthquake. “I don’t think I am the target but I became a victim I have no money now to return to work and I have no way to pay back debt,” Pandey, 35, lamented to local media. Many migrant workers such as Bishnu Pandey have been left hanging by India’s November 8th decision. Much of these remittances, which amount to 2.6% of GDP, are sent home using the now defunct banknotes. Hundreds of thousand of Nepalese citizens work in India as migrant workers, with Nepal receiving $640 million in remittances from its citizens in India in 2016. Combined with the fact that more than a third of the country is unemployed, India’s demonetization severely undermines the few avenues available to Nepalese citizens to sustain themselves.
Years of high inflation – reaching 10.24% in 2016 – effectively mean Nepal is facing substantial economic contraction. This uncertainty, combined with the nation’s remoteness, and the lingering effects of the devastating 2015 earthquake has seen GDP growth shrink to 0.5% for 2016. Nepal’s government is still negotiating the structure of the new state, with discussions on a new constitution ongoing. India’s decision could not come at a worse time for Nepal, as the Himalayan country is still facing uncertainty following the 2007 overthrow of the monarchy. India’s sudden decision has greatly affected many ordinary Nepalis, threatening economic uncertainty and increasing instability going forward. The sudden withdrawal of these notes from circulation has thrown the Nepalese economy into turmoil, as it is heavily reliant on India, with the Nepalese rupee pegged to the Indian rupee at 1.6:1.
While the move was aimed at fighting corruption, black money, and other domestic problems, it has created a host of new problems for India’s neighbours, particularly Nepal. By removing its 500 and 1,000 rupee notes, India has removed 87% of the total bills in circulation, leaving New Delhi with some 23 billion worthless notes to dispose of. India’s decision to remove its largest denomination banknotes from circulation came as a major surprise to both Indians and international observers. India’s rupee demonetization is severely impacting Nepal as Nepalis are left without recourse, with everything from pensions to tourism threatened.
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