In any of the poorer or developing countries I’ve been to, the worst thing you could have in your wallet is a large bill, India is no exception. Here, 10 Rupee notes (about 25 cents US) are the currency of choice as far as I can tell. These are used to pay rickshaws, for tipping and general baksheesh. They come at such a premium that I have given away 50 Rupees in order to hold on to my 10s. The worst thing to have though is a 1000 Rupee note (about $25 US) – as far as I know this is the largest bill here. No one wants them.
When we were in the Czech Republic there was a similar bill worth about $20 that I found couldn’t be used. We discovered there, and here’s a trip for travellers, that McDonalds was an excellent place to dispose of this ungainly currency. Buy a cheap hamburger, get the change. You can throw the burger out if you want, it’s worth it to get the spendable cash. But here in India, even the guys at McDonalds ask you for smaller bills when presented with these big pink elephants. I have discovered however that a furrowed brow and shake of the head is sufficient to force them to come up with change.
I see your perspective as that of a tourist. The way the costs are today (inflation going at about 4% per annum), I would think you would want to carry ‘fifties’ (Rs. 50 notes). Also one would need Rs. 1 coins since public phones need this for a local call …. this is the only thing really cheap.
The large notes (Rs. 1,000) are of little use in daily spending; but they are assidously collected by business men and the high flyers. In fact, one has to tell the banks in advance if you want these in quantities of even one hundred. The parallel economy still runs on Rs. 1,000 notes. These are also transported to the littoral countries where they are in great demand to pay for imports from India. These get a better exchange rate too.