Demonetisation

The Costs of Demonetisation: Weekly Markets Struggle; Job Losses Continue to Mount

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

Queues like this are still not a rare sight. Credit: Reuters

Queues like this are still not a rare sight. Credit: Reuters

Wholesale egg prices lower than usual

Wholesale egg prices in the city of Aurangabad have taken a hit. The prices stand at Rs 380, around Rs 70 less than what was expected, as reported by The Times of India. Winter is generally a time when sales go up by around 100% owing to the healthy nature of the product. However, this time around dealers have reported a shortage in demand as people are spending less on items like eggs and hotels have decreased their demand too. “December to January is peak season for egg sales. We sell over 15,000 eggs each day and prices are high. But, since markets are facing shortage of currency notes post demonetisation, our trade has encountered a rough patch. We could not sell even 8,000 eggs in one day and prices are falling with every passing day,” Abdul Aziz, one of the egg sellers, said.

Weekly markets struggle to keep up

With many businesses having shifted their focus to digital transactions, weekly markets in-and-around Delhi have been bearing the brunt of demonetisation. Shopkeepers have been complaining of lower demand since their customers are cutting back on expenses. They cannot afford to switch to card machines or other online methods of payment and their customers do not have bank accounts. Faizal Ahmed, a shopkeeper at the Ashok Nagar market, who has been running a stall selling women’s garments for the last 25 years, said, “We sell cheap products and our customers are mainly from the lower strata of the society. We don’t even have the option of using cards because our customers don’t have credit or debit cards. Many of them don’t have smartphones and those who have don’t know how to make digital transactions. Our profit margin is between Rs 50-60. If we start using cards we will have to increase the cost of our products to meet the surcharge rate, which is not feasible. The USP of our business is cheap prices and we cannot increase them beyond a point,” Hindustan Times reported.

Sewing machines losing market

Sewing machine sales across the country are down. Manufacturers are struggling to maintain a healthy profit in the face of falling demand. Workers across the country have been laid-off and manufacturing units are running on low costs. Virender Rakheja, who owns a unit in Sundarnagar, saw a drop in sales of around 50,000 machines in 2016 as compared to corresponding months of 2015. “Owing to fluctuating metal prices (raw material) and labour shortage, sales used to drop once in a blue moon, but nothing served us such a perilous blow as cash crunch following demonetisation.” Since the workers don’t possess bank accounts, paying salaries through cheques wasn’t a viable option. Around 50% of the workforce had to be laid off, according to Hindustan Times.

Travel and tourism continue to suffer

Two months on, the travel and tourism sector of the states of Kerala and Tamil Nadu is still reeling from the impact of demonetisation, according to the Times of India. Representatives of hotels in the two states have been casting their aspersions on any recovery in the short-term, citing the falling numbers of tourists at a time which is usually peak tourist season. Students visit these places at this time of the year, often in groups, but that hasn’t been the case in 2016 and 2017. “Our resort had accommodated three to four such student groups in December 2015. But, this category of travellers were missing last year (2016),” Naveen Kumar, administrative head of the resort, said.

Job losses continue to mount

In a survey conducted by the All India Manufacturers Organisation (AIMO), huge drops in employment and revenue have been predicted. AIMO, which represents more than three lakh small to large scale industries engaged in manufacturing and export activities, projected a 60% drop in employment and 55% loss in revenue before March 2017. The study concluded that since demonetisation there was 35% dip in employment and 50% dip in revenue – stating that almost all industrial activities have stopped, with the small and medium-sized enterprises (SMEs) sector affected for the larger part. “While AIMO understands certain immediate repercussions of such a bold step (demonetisation) by the government, it did not anticipate or was prepared for such a jolt to industries even after one month,” said the study, as reported by The Indian Express.