The Costs of Demonetisation: Dampening Spirits, Farmers Struggling

A daily round-up on the human impact of demonetisation.

A security guard puts a notice outside an ATM in Mumbai, India, November 30, 2016. Credit: Reuters

A security guard puts a notice outside an ATM in Mumbai, India, November 30, 2016. Credit: Reuters

Dampening spirits

With less than 5 days to go for the cash restrictions deadline, people are still waiting for relief. Although queues have shrunk, they still remain long in some places and banks continue to struggle with the cash shortage. The Times of India reported how kindness has become a luxury these days. Ruksana, who sits outside the Tajbagh Dargah asking for alms from devotees, talks of how people have stopped donating money since the announcement. Before November 8, she was able to collect anywhere between Rs 150 to Rs 200 daily. But now she feels lucky if she gets enough money for tea.

Hit by the cash crunch, Christmas celebrations were a low-key affair in Bhopal. Organisers reported that many families were prepared to cut down on expenses and decided to celebrate the festival at home instead of going to party spots, shopping malls or city’s popular places, according to a report in the Hindustan Times.

The All India Motor Transport Congress (AIMTC) has expressed how demonetisation has led to an unprecedented crisis for the trucking industry. The AIMTC, which represents almost 75 lakh truckers across the country, has reported on how the turnaround truckers time for truckers has increased as they are embarking on shorter trips. Moreover, there are still no provisions for cash payments on state highways and smaller municipal roads. The truckers are increasingly out of work as overall demand falls, according to Firstpost.

The cash flow in the tea-producing belt of the Dooars-Terai region in north Bengal, post demonetisation, resembles a dire situation. The leaf pickers have left work on the plantation as they jostle for cash outside banks. The workers haven’t received their latest wages as the cash flow in the region dried up.They are boycotting work to hit the streets in Dooars and Terai. They are demanding resumption of the fortnightly talab (wages) system prevalent in the region for more than a century. Sanjay Bagchi of the Indian Tea Association (Terai branch) told the Hindustan Times that he thinks the situation might soon lead to unrest as trouble brews in the region.

Farmers struggling

Demonetisation has hit farmers hard. Vegetable prices have eaten into the farmers’ profit. Onions sold for just Re 1 per kilogram in wholesale markets at Madhya Pradesh’s Neemuch and Mandsaur this week, while tomatoes cost less than Rs 2 per kg in Andhra Pradesh and Chandigarh. A kilogram of cauliflower fetched farmers just Rs 3 in Bihar and potatoes cost Rs 3-5 per kilogram in wholesale markets in Uttar Pradesh. Madhya Pradesh Kisan Ayog president Bansilal Gujar blamed the demonetisation-induced cash crunch as the prime reason for the price fall. “Earlier one trader used to lend cash to another trader but this practice has come to a halt as there is not enough money,” he told the Hindustan Times.

The fall in prices has been coupled with a strong produce this year. Another report in the Hindustan Times said farmers are being forced to dump a majority of the crop because demand has fallen drastically over this period.

Marketplaces see a dip in customers

The holiday season has brought no cheer to Vizag makeup artists. Despite it being the marriage season, beauty parlours and salons have seen a heavy drop in business as customers are looking to cut back on expenses. Maria Khan, a makeover expert from the city, said that she had almost lost half of her business. “Now, I am making only Rs 15,000 for complete bridal makeup when compared to the around  Rs 25,000 in the months before demonetisation,” she told the T New Indian Express.

Winter is ‘peak season’, but the second-hand fabrics businesses in Delhi have been bearing the brunt of demonetisation. According to a report in the Times of India, the biggest centre for this trade in the region is the market near Ghoda Mandir in Raghubir Nagar, which caters to over 5,000 women — like Meena — of the Waghri community from Gujarat. The whole of it has now come to a near standstill. Sixty-two-year-old Meena Waghri is ruing the effect demonetisation has had. This is the only trade that her family has known for generations, but now they are left with no other source of income.

According to a report in the Hindu, the Tibetan market in Delhi has seen a drastic drop in sales. Hot food and shopping are huge draws for the market. Winters are usually the season when students from the nearby Delhi University campus flock to the market. Majnu ka Tila, as it is known, is a market run by tibetan refugees. Restaurants are struggling to adapt to new e-payment methods, as they seek to normalise the inflow of customers.

Tourism industry hit

The demonetisation announcement has caused chaos in the travel and tourism industry. According to the Times of India, hotel owners in Agra have reported a 20-35% drop in tourists after the move. “There is a decrease to the tune of 20-30% in the number of people visiting the city. It’s unusual because December is usually the peak season for our industry,” said Amir Uddin, general manager, Hotel Royal Residency. He further added that fewer tourists can be expected in the future as the country faces an unprecedented cash crisis.

Winters in Orissa have generally the most amount of tourists in the coastal state of Orissa. The state was expected to receive around 20 lakh visitors after seeing rapid growth in the past few years. However, in December, the note ban plummeted by 25%. Demonetisation and shortage of cash with travellers and potential tourists has hit the industry badly, chairman of the Hotel and Restaurant Association of Odisha, J.K. Mohanty told the New Indian Express. He added that foreign tourists are reluctant to visit the state too.

DCCBs missing target

Maharashtra’s District Central Co-operative Banks (DCCBs) have lent less than 9% of their rabi season crop loan target of Rs4,435 crore so far. The DCCBs are crucial in linking agricultural credit societies to the banking system of the country. Since there has been a lack of cash supplied, coupled with banks being directed not to accept the de-legalised notes, farmers are struggling to keep up with production. The banks didn’t have a promising liquidity situation before this and the restrictions have worsened it, according to Livemint.