On November 8, 2016, India’s prime minister, Narendra Nodi made an announcement that all 500- and 1,000-rupee notes are now illegal and will be pulled from circulation (in US dollar terms, the notes are equivalent to $7.50 and $15). The two notes are the most widely used form of currency in India and citizens have been ordered to either deposit with banks by year-end or forfeit them. In one simple announcement, Prime Minister Nodi has removed from circulation 86 percent of India’s physical cash.
There is no secret that a huge underground economy in India is financed strictly with cash. The Indian government has said that the underground economy fuels corruption, counterfeit currency and terrorism financing. There’s no doubt that is true. But the main reason for the currency demonetization is because it’s difficult to collect taxes in a country where so much commerce takes place in cash. With cash removed from the economy, the shift will begin towards plastic and digital money. Bitcoin and it’s Blockchain platform will play a big role as the digital currency’s usage is expected to dramatically increase.
How will this new reality affect India’s regulated and unregulated gambling market? To begin with, it’s hard to know exactly how large India’s underground gambling market is. Based on some basic research, India’s total casino gambling, sports betting, online gambling and card playing (especially rummy), is upwards of $60 billion annually. A fully regulated gambling market will bring an estimated $5 billion in tax revenue to the government. The banned monetary notes will be replaced with new INR2000 and INR500 notes, although in much smaller quantities. The net effect of having less cash in the economy will cause a shift to digital and plastic forms of payment which will in turn shrink the unregulated gambling market and open up the market for legal gaming.
Rummy is hugely popular in India, and as access to offshore casinos and illegal bookies dries up, playing online rummy via computer and mobile devices will become even more popular. Transparency and convenience of payment options such as credit cards, debit cards and e-wallets will be an attractive incentive to bring even more players into online gaming. Gamers will also save on conversion fees. Indians who bet at illegal offshore casinos also end up paying a high fee to convert INR to USD, GBP or Euros. This is not the case at rummy websites because all transactions are in INR.
The actual benefit to the economy from demonetization is anybody’s guess. One thing is certain though, illegal gambling will get considerably smaller. Going from a largely cash economy to plastic and digital forms of payment will greatly increase the popularity of online rummy and other skill based games.