10 Jugaad Tactics for Remonetization

On November 8, the Indian Prime Minister, Narendra Modi, announced a surprise move to demonetize high-value currency notes. Demonetization was designed to strike a dagger into the heart of “black money” – unaccounted assets that rich businessmen, corrupt politicians and crime lords have accumulated through illegal means. Over the years, Indians have found innovative ways to beat the tax system and have collected trillions of rupees of black money.


Given how innovative Indians are, it comes as no surprise that they would find innovative ways to beat demonetization. In my recent trip to India, I have heard of several “remonetization” tactics, either from press reports or from personal stories told by friends and family.

Here are 10 innovative “Jugaad” tactics being used to beat demonetization:

  • | Middlemen provided an “on-demand” force of hundreds of daily wage workers who were hired to stand in queue for the middleman to exchange old currency notes. A daily wage worker can exchange 4,500 rupees once a day. They are paid about 400 rupees for their efforts. A force of 100 workers can exchange 3 million rupees per week, for a cost of 10% to the workers and a further 20% for the middleman. This is an infinitely scalable model!
  • | Fake 500 Rupee currency notes were printed by counterfeiters even before the government printed the real new notes. Since nobody really knew what the new notes looked like, the fake notes were quickly passed off as new notes and exchanged for old notes, which in turn were laundered using the method above.
  • 3 | Counterfeit old 500 and 1000 Rupee notes were slipped into piles of old notes and exchanged for new notes. The old notes were shredded by banks, leaving no evidence of the counterfeit notes.
  • 4 | Indian Rupees are freely convertible to Bhutanese currency without limits or restrictions. Taking advantage of this, loads of old Indian currency notes were dispatched to Bhutan, exchanged for Bhutanese currency and smuggled back to India. The Bhutanese currency will be converted back into new Indian currency at a later date.
  • 5 | Taking advantage of the loose restrictions on currency conversions in border states like Kashmir, charter planes full of old currency notes were sent to these states to be converted into new notes.
  • 6 | Middlemen recruited thousands of domestic help workers and agricultural workers as fronts. They deposited 250,000 Rupees into the Jan Dhan bank accounts of the workers – the maximum amount allowed to be deposited into a bank account without attracting tax scrutiny. These funds will be withdrawn at a later date, after giving a commission to the account holder.
  • 7 | ATM guards were bribed to allow for repeated withdrawals and to beat the queue.
  • 8 | People borrowed cash from other people who had cash and then the borrowers used PayTM (a PayPal-like service in India) to pay back the cash.
  • 9 | My nephew ordered food in a restaurant using Swiggy (a food ordering app) to be delivered to the restaurant where he was eating the food.
  • 10 | Beggars ask patrons who had no cash to give them to transfer money through PayTM to a street vendor, who would pay them back the cash, while keeping 10% for himself. Multiple beggars formed a consortium so that you could give 10 or 20 Rupees to be distributed among 4 or 5 beggars.

This is only a small subset of the strategies and tactics for remonetization. The Indian Government has been working furiously to defeat these tactics, issuing a flurry of over 100 new rules since November 8 to plug loopholes. A game of cat and mouse is being played in India and it literally evolves by the day. Only time will tell who wins in the long run. But if I was a betting man, I would bet on the mouse.