Prime Minister Narendra Modi probably thought he was pretty smart when he recently banned the country’s large currency bills, 500- and 1,000-rupee notes, 86% of cash in the market, in the name of fighting corruption. Instead India's economy was plunged into chaos.

But it has stunned hundreds of millions of poor and working-class Indians who live an almost entirely cash-based existence, paying in bills for everything from rent to groceries to cellphone credit.
The plan was shrouded in such secrecy that even India’s financial institutions were ill prepared, creating long, sometimes unruly lines outside banks, ATMs and chronically understaffed post offices that are authorized to exchange the now-worthless notes and dispense new ones.
Credit and debit cards are unaffected, but only half of Indians have bank accounts. Even for those fortunate enough to find some cash — the government has set a temporary $66 daily limit for withdrawals — a newly released 2,000-rupee banknote is in effect useless for daily purchases because most merchants can’t make change.
Adding to the headaches is that the 2,000-rupee note and a new, revamped 500-rupee note are of a different size, meaning it could take weeks to reconfigure the country’s 200,000-plus cash machines to dispense them.

Actually it'll probably take four months to reconfigure the ATM machine.

Few villagers have access to an ATM. Most have to trek to a bank branch to change their cash, which means losing out on crucial days of labor. Many Indians, particularly women, still don’t have an active bank account. Finance Minister Arun Jaitley wondered aloud how many poor people would even have 1,000-rupee notes -- probably a rhetorical question, but surely it shouldn’t have been. Someone should've sought the answer before shutting down India’s financial system.

But that's only scratching the surface.

Blue-collar workers are not showing up for jobs, unable to scrounge up money for bus fare or fuel to power their motorbikes. Mumbai’s cash-based taxis and rickshaws have also struggled as middle-class customers opt for card-based services such as Uber.
Even filling up the tank has become a chore as gas stations, which have been authorized to accept the old bills for a limited time, refuse to make change, said Lallan Jaiswal, a cabby sitting idle by the roadside, his khaki uniform slung over the driver’s seat.
“They fill up the tank only if we buy gas worth 500 or 1,000 rupees,” Jaiswal said — the equivalent of a day’s worth of fares.

India's economy just got hit with a neutron bomb. The buildings are still standing but people are dying.

Nearly three dozen people have died in the aftermath of India’s bold, surprising move to demonetize its Rs 500 ($7.5) and Rs 1,000 ($15) currency bills overnight last week.

Some of these people have reportedly died standing in the long snaking queues, while many others died because hospitals, pharmacy shops, and ambulances refused to offer services in exchange of old notes. 

A child reportedly died at a hospital owned by union culture and tourism minister Mahesh Sharma, after the staff refused to accept old notes for treatment. 

An infant died in Odisha after an autorickshaw driver refused to take the family to a hospital. The family didn't have smaller denomination notes with them for the fare. A sick newborn was refused treatment in Mumbai after the parents couldn’t provide money in new currency bills. The infant died.

Some people are losing hope. A 50-year-old mother of two committed suicide in Gujarat after grocery stores refused to accept old currency notes. In another similar incident, a 55-year-old woman in Telangana committed suicide after learning that Rs 5.4 million ($79.500) in cash she had saved over the years was useless overnight.

All this in just one week. ONE WEEK.
What will India look like two months from now? Conditions will get worse before they get better.
Even worse, it's unlikely that corruption will be affected by banning cash.

Even in the best case scenario -- that a significant proportion of the outstanding currency is destroyed -- there’s no reason to suppose it was all black money and not the savings of regular citizens scared of harassment by tax authorities. Modi has dropped dark hints that this is just the beginning, raising fears that business should now worry about of constant tax raids and the reopening of decades-old cases. In fact, that dark new age may already be here.

Even setting aside the painful adjustment, the long-term effects of this monetary shock on India’s informal economy could well be severe; a large proportion of marginal firms may not survive the loss of a fortnight of income. The informal financial sector -- unregistered moneylenders who provide loans to businesses worth 40 percent of total bank lending -- will be decimated.