As the unorganised sector continues suffering, civil society members, bankers and politicians remain sceptical of demonetisation’s impact on black money.
People scuffle with a policeman as they try to enter a bank to exchange their old high denomination banknotes in Ahmedabad, India, November 17, 2016. Credit: Amit Dave/Reuters
It is no secret that India’s informal sector, a largely cash-based economy, has taken a big hit because of demonetisation. While the government insists that the suffering is only temporary and worth it for cracking down on black money, several representatives from the unorganised sector are presenting a starkly different account of things on the ground.
At a public meeting, held yesterday evening at the Constitution Club, speakers representing domestic workers, hawkers and fishermen spoke about the economic condition of their communities, painting a vivid picture of the damage caused by the sheer shortage of cash.
Domestic workers, daily wage labourers, rickshaw and auto drivers, dhobis, street vendors such as hawkers, fishermen and others in the informal cash economy now have to choose between going to work and earning money or joining serpentine queues to access their own money.
Sunita, representing the Domestic Worker’s Union, told the packed hall, “aam janta ke pass kala dhan nahi hai, hum roz kamaate hain aur roz khaate hain.” (The common people don’t have black money, we earn on a daily basis and spend on a daily basis.)
As Dipankar Bhattacharya, CPI-ML, pointed out, the government may claim that poor people don’t have the larger denomination notes, those who get their earnings on a weekly basis are “obviously paid in Rs 500 and Rs 1000 notes. Everyone has them.”
It is the day-to-day nature of such wage-based work that has made demonetisation especially damaging to the unorganised sector.
Women who work as domestic helpers find themselves in queues for days, only to find out that banks don’t have new notes to dispense. Then they return to work to be questioned by their employers on their absence; meanwhile, buying groceries, paying school fees for their children and paying rent has become nearly impossible with landlords insisting on new notes and, vendors like Mother Dairy unable to accept old currency.
Sunita added that this trade-off is forcing several women to take on more debt as they increasingly function on credit, waiting for the cash economy to stabilise.
Things are no better for the four crore street vendors who conduct business in India – represented at the meeting by Shaktiman Ghosh, National Hawkers’ Foundation – who have lost over 50% of their business due to the cash shortage.
Ghosh added that the unorganised sector, including vendors, middlemen and producers from small-scale, home-based and cottage industries, has been negatively impacted across the board with sales plummeting by over 50%.
To add to these problems, Ghosh said 60% of street vendors in India do not have bank accounts, leaving them stranded in much the same way that others in the informal sector have been – unable to earn or utilise what they do have.
The people who are in favour of Prime Minister Narendra Modi’s decision are the ones with “chaar se paanch credit cards” (four to five cards) in their pockets, Ghosh told the audience.
He concluded by labelling the move a big saazish (conspiracy) by the forces that support having a cashless economy.
T. Peter, from the National Fishworkers’ Forum, echoed the same set of conditions, saying work has come to a standstill for most fishermen across the country. The tight economic conditions are exacerbated by the fact that most don’t have bank accounts, imperilling not just their earning capacity but also their savings.
Referring to how demonetisation is destroying lives, Peter said, “It’s a matter of embarrassment that Modi is not listening to the people, but has focused on visiting as many nations as possible in a bid to raise his personal status.”
Peter added that all the people sitting in parliament should be held accountable for their inaction in the face of such suffering and urged the audience, along with fishermen, members of the Dalit and Aadivasi communities, to come together and demand that the move be rolled back.
Bankers question the RBI’s lack of planning
Bankers have been caught between a rock and a hard place since November 8, working overtime and even rehiring retired employees in a bid to meet an ever-increasing demand with a virtually non-existent supply of new notes.
People queue at windows of a post office to deposit or exchange their old high denomination banknotes in Lucknow, India, November 16, 2016. Credit: Pawan Kumar/Reuters
Thomas Franco, senior vice president, All India Bank Officers Confederation, described the government’s move to curb black money as “burning the house to catch a rat.”
He said there has been “no proper planning” and the country’s banks “have no idea when the Rs 500 will be introduced in the south.”
There is more bad news for those hoping that the pressure on ATMs will let up in the near future. According to Franco, only 20,000 ATMs have been recalibrated for the new notes so far.
The government’s orders are to recalibrate 12,500 ATMs a day. However, Franco said, “Even if we do 12,500 a day, it will take 16 days to calibrate all the ATMs for the new Rs 2000 notes. Then we will have to do the entire process again for the new Rs 1000 notes.”
The audience burst into applause when Franco demanded the resignation of RBI governor Urjit Patel. As he put it simply, “RBI should have prepared. We don’t mind suffering but what will this bring?”
What about overseas bank accounts?
Bhattacharya along with JNU professor Prabhat Patnaik, Mani Shankar Aiyar from the Congress, D. Raja from CPI and Anupam from Swarajya Abhiyan all countered the government’s conception of black money and criticised the move for being ineffectual in actually targetting any illicit earnings.
Patnaik referred to the move as an “astounding abandonment of reason” for the government to withdraw 86% of the currency in circulation when over 70% of transactions in India are made in cash.
He added that black money is not a stock of illicitly earned cash physically sitting around, rather the term is “shorthand reference to an undeclared set of illegal activities.”
Aiyar took a sarcastic approach, chiding Modi for his decision by referring to his lack of economic knowledge and his apparent refusal to consult either finance minister Arun Jaitley or RBI governor Urjit Patel before instituting demonetisation.
He implied this move was a gimmick to distract from the fact that the Modi government has achieved little as it approaches the halfway mark (30 months) of its term later this month. “We need to end this in the next 30 months,” he told the audience. And then turned to his fellow speakers on stage, encouraging them to continue agitating and protesting against the move.
Raja and Anupam echoed the same sentiments, saying the real black money issue lay in how money is transferred through ‘participatory notes’ from overseas bank accounts in Mauritius, since the notes in question do not list the names of the owners of this money.
Notably, the BJP government has remained mum on this subject, even refusing (like the Congress government before it) to release the names of people who own overseas bank accounts.
Another sore point for the political contingent was the government’s uncooperative attitude and its unwillingness to accept criticism. Several speakers complained about the government’s practice of branding people “anti-national” and now “black money holders” for questioning and criticising its decisions.
There was little to no praise for the move with every speaker, representing varied sections of society, listing the woes brought on by the hasty, unplanned move to withdraw Rs 500 and Rs 1000 notes from circulation.
However, little was said concerning concrete steps for moving forward or even the legality of the government’s move.