Yet 90% of my social circle (middle-upper class India) is in strong favor of this seemingly terrible move by Modi government. It is not unlike the support Duterte has seen in Philippines.

Why don't Indians continue to use the 1000 rupee notes? They can still be used so long as they are not forged or totally damaged and people are still willing to accept them. If there is trust they can be used just like bitcoin. A group of entrepreneurs can create a database of 1000 rupee notes and their owners just like normal banks and destroy them afterwards if they so wish. All the owners have to do is to make transfers between the accounts and they should be fine. So long as there is trust and reliability what could go wrong, and how would that differ from Bitcoin?

What stops people from creating a Bitcoin type currency based on unwanted 1000 rupee notes?

By the way isn't the amount of 1000 rupee notes in circulation exceed the total value of all Bitcoins creatable?

One would expect people faces with lack of cash to adopt some substitute currency. Is that happening?