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5 major consequences 50 days after notebandi – Only pain, no gain

By Abu Hasan (ViewsHeadlines)

Prime Minister Narendra Modi while announcing demonetization and scrapping of Rs 1000 and Rs 500 notes – 86 percent of the entire currency in circulation –claimed that the pain will be minimal while gain phenomenal. But after fifty days of the notebandi, it is pain and absolutely no gain.

The quest to get hold of the eluding cash has become so difficult that many people who had been running their businesses for decades were forced to shut down their business and abandon their workers. Many did as they had no choice.

There is no denying the fact that small businesses had a harrowing time since the beginning of the demonetization process. Initially they thought that the bad phase will be over within a few weeks time. But now, even after fifty days of the notebandi, nothing has improved. On the contrary their precarious economic condition has gone from bad to worse.

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Businesses being ruined
Many people in Old Delhi and Shahadra, a locality in East Delhi, have been forced to shutter down their presses permanently. The same is the case of many restaurant owners not just in Delhi but surrounding areas. Cab drivers, who used to have roaring businesses till before the sudden ban on high value currency notes, are sitting idle, wondering as to how they will be able to pay the EMI on the sedans they have been driving.

Asila Offset Press that has been there for decades near Kalan Mahal in Old Delhi has been shut down due to lack of cash. Its owner who had invested recently in new machine was forced to shut it down permanently as he couldn’t pay to his workers.

If things don’t look rosy in the capital, rural areas are worse off. While some ATMs may be dispensing cash in some localities in New Delhi and some banks may be handing out some cash to their depositors, the situation is starkly different in small towns and villages.

Villagers in far off places have to travel a long distance to reach a bank, if they happen –by any chance – to have a bank account. But most often, they have to return empty-handed as the bank had no cash. And mind you, most people in rural areas have no bank accounts, as no bank exist there.

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Villagers worst hit
A public hearing called by the Mazdoor Kisan Shakti Sangathan (MKSS) on December 26 in Beawar, Rajasthan, clearly shows how the notebandi fiasco has impacted almost everyone. “Anil Gupta, a local businessman, describes how his daughter’s wedding was turned traumatic by demonetization. Even to withdraw money for the officially approved purpose of a family wedding, he was asked to produce individual affidavits from each vendor or service provider declaring that they did not have bank accounts. Narendra Modiji has chosen to ride the tiger of notebandi and will eventually be eaten, he says. Ram Singh, a retired Havaldar of the Indian Army, causes a flutter by beginning with a firm “Sanatana dharma ki jai”, but quickly returns to the theme of the day, detailing how he is unable to draw enough money from his own pension to manage his large household. Akhlaq, a retired railway police constable, provides a startlingly sophisticated analysis of how the government’s narrative kept shifting from corruption to terrorism to counterfeiting to a cashless economy. Both Kanku Devi, a disabled middle-aged woman, and Tarachand, a tall 80-year-old man beginning to stoop, have been denied their pensions because the fingerprint-reading machine mandated by the Rajasthan government for verifying identity refuses to recognise their thumbprints”, says the report.

Farmers are worst hit. In a year when they had a bumper crop due to abundant rain, the notebandi ensured that they are unable to even recover their investments.

Poorest regions worst affected
Bundelkhand, one of the poorest regions of North India is witnessing a crisis of sorts. A report in The Wire while talking about the problems in the region in the wake of demonetization says, “Shortage of cash in the agrarian markets in Bundelkhand due to the government’s decision to ban 500 and 1000 rupee notes during the month-long sowing season has left many farmers like Yadav wondering how to pay off their debts. As November passed by without adequate cash, most of them could not sow…The Bania paid us Rs 40 per kg of urad, citing that notebandi has affected him too. Usually, we never sold it for less than Rs 65. The huge losses aside, we do not have cash to sow wheat. While this [demonetisation] may erase black money, our conditions have gone from bad to worse,” said Lakhanpal Yadav, another small farmer with less than five acres of land…We require 16,000 rupees for sowing five acres of land. This includes the price of seeds, diesel and electricity costs, fertilisers and pesticides. The prices of all these have gone up. Banias (who also double up as private agricultural traders apart from their main business of money lending) say that notebandi has affected the supplies of these essential products,” said Shimariya’s Balwant Yadav”.

Vegetable mandis remain deserted
The way the demonetization has impacted the farmers, the mandis where their products are sold and distributed to the larger world, have been badly impacted too.

Vegetables and fruits have become excessively cheap as there are not many takers in the market. Perishable fruits like banana and guava have been badly hit. A report in Frontline magazine while talking about the impact of notebandi on India’s biggest wholesale fruit and vigitable market, Azadpur Mandi, has this to say, “In some cases, stocks have arrived but remain unsold because there are no buyers. Take the case of Ranjit Singh, who has driven all the way from Punjab’s Hoshiarpur district. He brought a truckload of potatoes two days ago but they are lying unsold… His predicament appears to mirror the situation in the entire market, spread over 17.2 hectares. Metharam Kriplani, president of the Chamber of Azadpur Fruit and Vegetable Traders, said arrival of fruits and vegetables to the market had decreased by half and that prices had come down by 10 to 20 per cent because of the impact of demonetisation. There are some who support the move, seeing it as an important weapon in the government’s battle against black money, but the cash crunch has hit them hard. The situation at the Azadpur Mandi is the most glaring instance of how badly India’s informal economy has been affected by the sudden invalidation of nearly 86 per cent of the country’s circulating currency.

Unorganized sector may be permanently damaged
Organized sector in the country employs merely a fraction of the labor force in the country. While the organized sector is also facing the brunt of notebandi, the unorganized sector has been worse hit and may be permanently damaged. It may take many years before it is able to recover from the deadly blow that it has received from this farce. A report by the National Commission for Enterprises in the Unorganised Sector suggests that India remains the land of unorganized sector. It goes on to add that unorganised sector comprises all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services and operated on a proprietary or partnership basis with fewer than 10 workers. In 2011-12, nearly 83 per cent of India’s workforce was concentrated in the informal sector. From Moradabad’s brass industry to Aligarh’s lock, Surat’s diamond, Lucknow’s chicken to Ludhiana’s massive clothes industry might have suffered a body blow. Tens of thousands of workers have been left unemployed and many small scale industries have been shut down permanently.

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