On November 8, the government announced that the ₹500 and ₹1,000 notes – the two largest value bank notes in the currency – will no longer be legal tender, with almost immediate effect.
“Eventually it’s going to be more positive. On the shorter term it’s going to be a little bit negative”
The decision was made by Prime Minister Narendra Modi with the aim of ridding the country’s economy of ‘black money’, counterfeit notes, and corruption. A new ₹500 note and a ₹2,000 note will be introduced into circulation soon.
India is predominantly a cash economy and many facets of day to day life are affected by the sudden irradiation of the notes, including international education.
One of the areas of overseas study that has felt the brunt of the demonetisation is paying for student visas.
“Nobody had cash to pay VFS [the visa application service partnered with the UK government],” said Sonya Singh, managing director of SIEC. “So they had called us up asking if we could arrange for cash to pay on their behalf to VFS to get the visa services.”
Initially, people could only withdraw ₹4,000 a day from their bank accounts, according to Singh.
“We had to put everything on hold,” she said, adding that a colleague had spent up to four hours a day queueing to withdraw their allowance.
VFS eventually responded to the problems by accepting bank orders. However, this method of sending money has posed some difficulties, as many banks have prioritised changing the currency over sending money through bank transfers, explained Sushil Sukhwani, director of Edwise.
He highlighted Canada as an example of a destination country where some difficulties have occurred with bank transfers.
The impact so far has not been huge however, he stressed, but explained that the effect will be felt most strongly on tuition fee payments.
Naveen Yathapu, director of education consultancy, i-20 fever, said parents are likely to feel the brunt of the changes, as they have traditionally paid for students’ education abroad using a combination of methods – “their own sources, loans, family members who support them, family members in the US” – he listed. “But with this demonetisation, a number of sources would basically be cut down into half,” he said.
Echoing these concerns, Singh nodded to the common practice of relatives or family friends of students overseas fronting the cost of tuition fees and being repaid in cash by the student’s family when they visit India.
“That’s gone too,” she said. “There are aspects to it which I don’t think a lot of people are considering, so I think it’s going to impact international education definitely.”
Traditionally agricultural areas are likely to be hit hardest, added Singh.
“80% of the population lives in villages. One bank in a village could be five miles away”
“I don’t think there are going to be numbers specifically from the north of India and from Hyderabad, which are agricultural communities, to be able to pay their tuition fee or their living expenses,” she projected.
Overseas higher education, seen by many has a luxury, may experience disproportionate damages compared to other industries, noted Yathapu.
However, the international education sector is not the only industry experiencing the effect of demonetisation.
“It’s going to impact everything,” said Sukhwani, nodding to the leisure and travel industries in particular.
He said that 70% of Amazon orders in India are paid in cash to the driver on delivery, instead of by credit or debit card online, illustrating the extent to which India operates as a cash economy.
A large proportion of the population do not hold a bank account, and those who earn money on a daily wage and pay for their food every day will also be affected, said Singh.
“Eighty per cent of [the Indian population] lives in villages,” she said. “One bank in a village could be about five miles away.”
However, in the long term, the international education industry and other institutions in society are expected to stabilise.
“It’s going to have a great effect,” predicted Abhijit Zaveri, managing director of Career Mosaic.
“But eventually it’s going to be more positive. On the shorter term it’s going to be a little bit negative.”