India reluctant, Nepal at bay

India reluctant, Nepal at bay

SAM Staff,

It has been almost three weeks since the Indian government banned circulation of high-value banknotes. But they are still indifferent to the Nepali government’s proposal of providing exchange facility to Nepalis holding banned Indian currency. Kathmandu is increasingly worried about it.

On November 9, India banned Rs 500 and Rs 1000 notes from circulation. Indian citizens can exchange or deposit their notes by December 30th deadline set by New Delhi’s transition plan. However, Nepali people have no opportunity like that.

Following the Delhi’s decision, Nepal requested the Indian government to allow Nepalis to exchange the banned banknotes with legal tenders in Nepal. But it did not receive any response so far from the other side.

The reluctance of India has affected hundreds and thousands of Nepalis, the country’s media reported.

Economy of Nepal, a land-locked country, is heavily dependent on India. Many Nepalis go to the bordering states of India to earn a living as daily-wage laborers or visit to seek medical treatment. Many Nepali traders those engaged in cross-border trade hold high-value Indian currencies. Also, thousands of Nepalis on pilgrimage tours to India every day.

Besides, central bank of Nepal “Nepal Rastra Bank”, also facing problem with the banned Indian currency, reported the Kathmandu Post. The bank estimates, currently, defunct Indian currencies within the financial system in Nepal is worth Rs 33.6 million.

On the contrary, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said that some 10 billion rupees ($146 million) in defunct notes is held by the informal sector and private individuals.

The FNCCI feel, the Indian move is a major loss in savings for the country with a nominal per capita GDP of only $837.

The Global Risk Insights, an online economic news outlet reported, that India’s rupee demonetization is severely impacting Nepal as Nepalis are left without recourse, with everything from pensions to tourism threatened.

When would Nepal get rid of the problem, no official was available to receive an answer. Whether the country would get a solution to this at all, no one knows.