The Wards have spent the better part of their nine-week pre-booked holiday in Goa lining up at foreign exchange counters and ATMs. “We wanted to take the first flight out after three days of it, but only the allure of the Goan sun kept us here,” said Carol Ward, who with her husband Kevin are among the thousands of sun-seeking British retirees who head to the beach state each year. And demonetisation has ruined their vacation.

“The other day, we stood at the money changers’ line and were able to change 60 pounds sterling each at Rs 78 to the pound, which is okay, though the official exchange rate is Rs 84,” she said. “That was our quota for the entire week, he wouldn’t give us more.”

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A currency limit isn’t the only problem the couple from Lancashire have faced. They have stood in line and gone back empty-handed, with the counter running out of money. At other times, money changers have tried to cheat them, offering an exchange rate of only Rs 67. They have also been worried about the safety of their British pounds left behind in their hotel room.

“And even with the money we got, we used it all to pay the bills we had run up in different restaurants who gave us service on credit,” she said. “We were back again to square one with very little left to spend.”

For now, the couple are spending frugally, only on essentials, and have made peace with the fact that they will have to go back without their fabric stock and other shopping, or the dental treatment they usually get while in Goa.

Revenue loss: Cascading effect

This is the story in Goa as it heads into its peak tourist season in December. With a 20%-25% downturn in the state’s tourism economy in November, attributed to demonetisation, there is little optimism that the coming months will be any better.

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“Foreign tourists are going back with a large amount of the money they bring here to spend on their holidays because they are unable to get exchange cash, which is being rationed,” said Ralph de Souza, a member of tourism trade body Travel and Tourism Association of Goa.

This has hit sales at restaurants and beach shacks, markets, companies offering day tours and adventure excursions, as well as all the other services that depend on tourists. The cap on cash withdrawals at banks and non-functional ATMs have further limited spending.

“The multiplier effect of this goes down to the base, hitting supply chains, employment,” de Souza said. “Everything gets affected.”

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As a result of the deflated spending by tourists, the loss of business, government revenue collection from value-added tax and other levies, and foreign exchange is projected to be around 20%-25%, he added. By the state governmental’s assessment, Goa is staring at a minimum revenue loss of Rs 786 crores this financial year.

“We were expecting things to improve at a faster pace, but the situation is the same as before,” said hotelier Savio Messias.

Holiday from hell

International tourists landing in Goa with pre-booked vacations have probably had it the roughest. “This morning, I spent four and a half hours standing in the ATM line and only got Rs 2,000 for my trouble,” said Kevin Ward. “And the ATM charges foreigners a Rs 400 surcharge on every transaction. The other day, I waited all day and got Rs 10,000 at one go, so the Rs 400 surcharge was okay. But on Rs 2,000, it’s a bit steep.”

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His wife Carol sympathised with local businesses incurring losses as a result of the cash crunch. “There were five others from Maria’s shack lined up with us outside the ATM,” she said. “So, she [Maria] was probably losing business.”

Katya Alcazar, from Russia, said it had been a frustrating holiday. “I spend all my time trying to change money at the banks, ATMs and at Western Union,” the tourist complained. “Still, there’s no money to spend at cafes. Some accept roubles, some don’t.”

Newspapers have carried reports of tourists, driven to desperation, paying for fruits in dollars.

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Some have been luckier than the rest. “I have been doing well so far, but I’ve only been in Goa three days,” said Sharon MacAvoy from Dublin. “I had a couple of thousand rupees from my previous trip, so I was able to pay the taxi fare when I landed.” She also managed to change some euros for Rs 65, though the rate is Rs 67. “I have Goan friends, if I am in trouble,” she added. “But they are facing problems too, right?”

Feedback worries

While the revenue loss is bad enough, the tourism industry is also worried about negative feedback about the financial volatility in India. “Adverse feedback sends a very bad signal to a very sensitive and competitive market,” said Ernest Dias, the Goa representative for inbound charter operators SITA and Thomas Cook India, which bring in the largest holiday volumes from Russia, the United Kingdom, Finland and Scandinavia. “That and potential cancellations is the worry now. There have been no cancellations that I have heard of, but those who are here are facing problems.”

On travel website IndiaMike, “No money in Goa” is an ongoing discussion thread and the comments are far from encouraging. “A lot of first timers to Goa in our hotel arrived yesterday. The tour operator told them before they left the uk everything was fine now.!!!! We stopped at nearly every ATM from Candolim to Mandrem today, and nothing available. All empty. I only have a couple of days left so its back to the shop in Candolim beach road and the 200 rupee card charge. Not wasting my last few days looking anywhere else,” wrote Sukie K from Preston, UK.

Tengku Bahar/ AFP

Domestic blues

While foreign visitors rough it out in Goa, many domestic tourists are giving the state a miss altogether. Weekend domestic tourist numbers – made up of those who fly into the state or drive in from the nearby metros of Bengaluru, Mumbai and Hyderabad – have dropped 15%, said tourism trade body representative Ralph de Souza.

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This has hit small hotels and businesses that thrive on the domestic customer base, said hotel owner Savio Messias. Most of them run on cash. Even before demonetisation, banks were struggling to meet demands for point of sale devices for digital payments, and this has not changed now. Poor connectivity adds to the problem, making Goa’s economy a largely cash-driven one.

In such a situation, Messias said that the bigger hotels and restaurants had the advantage.

The cash crunch can be seen everywhere. Around 75% of domestic walk-ins for Panjim’s river cruises come to the jetty by cabs, which take only cash. “We get around 1,500 tourists a day on average normally,” said Akash Madgavkar, owner of Paradise Cruises. “It is down 20% since demonetisation.”

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Vinayak Nanoskar, a tourist cabbie and leader of the North Goa Tourist Taxi Association, said there was a 30% drop in hires. “With ATMs not working properly and people not getting sufficient cash, tourists are naturally giving food first priority,” he said. “So they are spending less on exploring and travelling. Not like before.”

The only segment in Goa’s tourism industry seemingly unaffected by demonetisation is the high-end wedding business. There have been at least three celebrity weddings in the state in the past month – that of cricketer Yuvraj Singh to actor Hazel Keech, and of entrepreneur Anjali Mody, and Mukesh Ambani’s niece Isheta Salgaokar.

Corrections and clarifications: This article has been edited to correct the name of Mukesh Ambani’s niece.