Monday, June 18, 2007

Coins run out as smugglers turn rupees into razors

India is suffering such a severe shortage of coins that shopkeepers have resorted to begging change from beggars to keep their businesses running.

Calcutta has been the worst hit after the smuggling of one and two-rupee coins into Bangladesh, where they are made into razor blades and religious ornaments, police said. Because of the dearth of change thousands of people stood in line for hours yesterday in Calcutta outside banks to exchange notes for coins.

One woman set up a stall outside a bank selling packets of 100 rupee coins for 120 rupees. Inflation of nearly 5 per cent in India means that one rupee is worth more in its raw stainless steel form than its face value as a currency.


“We have found that beggars are a good source of coins,” Mum Poddar, who runs a stationery shop, said.

Officials investigating the disappearance of coins, which are thicker than their Bangladeshi counterparts, claim that a one-rupee coin can be melted down to make three or four razor blades, worth two rupees each.

The coin shortage has forced the central bank of India to enact emergency measures. This month it has issued coins worth five million rupees, including one million on Thursday alone. But demand is still outstripping supply. To get around the problem, traders are requesting that their customers buy more goods, to arrive at a round sum, or are giving sweets as change.

Economists say that the problem is more likely to have been caused by unscrupulous middlemen hoarding coins to create an artificial shortage, then charging a hefty commission for distribution, than smugglers melting down base metals.

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