Bitcoin in India
India’s Bitcoin Google Searches Hit All Time High
India’s economy, which used to operate at 90% or more on cash, now face shortages of the new ₹500 and ₹2,000 notes, incentivizing some to look for alternatives as money has seemingly dried up. Mr. Shoran, an engineer, tells Washington Times:
“I remember standing in lines at banks from 6 in the morning until the afternoon and then finding out that they had run out of money.”
“In many villages, grains are being exchanged for vegetables and other items of daily needs.”
Moreover, in bordering regions, people are using the currency of neighboring countries, primarily because there is no bank to be found for miles, and those banks that are found have long queues. Leaving millions with no choice but to seek alternatives, such as bitcoin, which, albeit at a small scale, is now, apparently, a competing option to bartering or neighboring currencies.
Can India Be the New China?
Bitcoin currently attracts a premium of almost $200 in India as demand relative to supply is clearly far higher than even in China, but volumes are nowhere near. The reason is probably because even though the economy has kept growing, corruption is endemic, with the country lacking basic infrastructure in some areas, such as roads or electricity, and courts inaccessible in some places.
In contrast, China has used much of its newfound wealth to advance its infrastructure even more than the west with its high speed trains a symbol of the future for the entire world. They have bypassed traditional banking, with companies such as WeChat and other tech giants processing more than 50% of China’s financial transactions through WeChat pay and Alipay apps. In combination, this has provided an attractive environment for bitcoin as China’s entrepreneurs look to take advantage of every opportunity.
By comparison, India’s lack of law enforcement anywhere near the levels of China or the West, which is probably due to the government’s inability to collect taxes, has failed to provide similar success stories despite comparable growth rates.
That may be about to change. The demonetization move has increased collected taxes by 14%, according to Arun Jaitley, India’s finance minister, but whether it will be used towards infrastructure or towards the pockets of officials remains to be seen. Moreover, it comes at a high cost for the Indian people as well as the economy which is expected to slow down this year due to demonetization as well as rupee’s downwards trajectory towards a record low against the dollar which may exacerbate India’s already high levels of inflation.
In this environment, bitcoin has strong potentials for growth, especially in the richer coastal areas, as Indians now look to protect their wealth as well as perform that most ancient function – commerce.