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India – Ruined livelihoods #demonetisation

Sushil Kumar VermaWaiting in vain for customers. A shop selling fruits in Azadpur Mandi on November 15.

More than 80 per cent of India’s workforce is in the informal or unorganised sector and has taken the full brunt of the demonetisation move. By AKSHAY DESHMANE

DESPITE having spent three decades unloading fruits and vegetables at Asia’s biggest fruits-and-vegetables market, Delhi’s Azadpur Mandi, Nabi Ahmed does not remember a time when business was this bad. “Except during times of peak militancy or intense winter in Kashmir, arrivals of apples have never been as affected as they are now,” he told Frontline, gazing at the largely vacant apple sheds nearby, which would usually be abuzz with the arrival and sale of cartons of apples at this time, the peak season for the fruit. He is not sure about actual numbers but says he is unloading fewer than half the number of cartons he used to unload previously. “Notebandi has affected everybody at the mandi. My daily earnings of Rs.500 to Rs.1,000 have come down by about half. There is a lot of unpredictability about the business because the number of shipments and the number of prospective buyers have come down drastically”, said Ahmed.

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. “There is nobody to buy them because they don’t have new notes. That is why I have been waiting here for two days to sell this stock,” he explains, speaking with this correspondent at a small tea stall. The slump in trading activity has hit many ancillary businesses located around the market. The owner of this tea stall, for instance, is Ram Vilas, a migrant from Samastipur district in Bihar. “Ever since notebandi, my earnings have reduced by more than half. If I made Rs.1,000 a day before, I make only about Rs.250 now,” he said.

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.

According to the National Commission for Enterprises in the Unorganised Sector, the informal or the 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.

By its very nature, the informal economy relies on cash. Electronic financial transactions are an exception to the norm of daily transactions in cash carried out by hundreds of millions of Indians engaged in micro-, small- and medium-scale businesses. Predictably, the effect of demonetisation has been the worst on the informal economy, especially on the workers who depend on their daily earnings to make ends meet and have no reliable social security mechanisms to fall back on.

It should come as no surprise then that many interest groups representing specific sectors of the informal economy have spoken out against the demonetisation measure or the manner of its implementation. Speaking to Frontline, Shaktiman Ghosh, general secretary of the National Hawker Federation, said: “There has been an adverse impact on street vendors and the entire low-circuit economy. Our producers come from cottage and small industries. They are small, poor and retail-dependent. They number about four crore and have a turnover of Rs.8,000 crore a year. The adverse impact on the low-circuit economy has benefited the online businesses. From November 9, sales in the retail market has been reduced to one-third of what it was previously and in wholesale markets to half of what it was. This is unjust. They have let off the big businesses easily.”

Interestingly, an assessment by the international consulting firm Deloitte, which was released soon after the demonetisation announcement, also pointed out that there would be an adverse impact on the informal economy. It said: “There will be disruption in the current liquidity situation as households are likely to get affected by the note exchange and currency withdrawal terms laid by the government. Though clarity is unfolding on this, commodity transactions and general cash market transactions are likely to feel an immediate impact. Unorganised sector proceedings, including small trade market activities will remain volatile in the short term. Roadside vendors, cab drivers, kiranastores, etc., have already stopped accepting INR 500 and INR 1,000 notes. It is important to note that a significant percentage of the Indian workforce, employed in this sector, is likely to be affected by immediate liquidity issues. Overall, a likely negative impact on disposable income is expected along with disruption in the consumption patterns of the general populace. It is estimated that there may be a negative GDP impact in the current quarter as consumption shock gets transmitted in the system. However, the quantum and degree of this impact cannot be ascertained at this time.”

Antagonising BJP’s core constituency

A large section of those affected are clearly the core constituency of the ruling Bharatiya Janata Party (BJP). Finance Minister Arun Jaitley has hinted in his recent statements that the government was aware that a situation such as this was likely to emerge. “Demand may be affected in the short term,” he said, due to shortage of liquid money.

However, he airbrushed that concern by promising that the system would become functional once the new notes were replenished. However, it is uncertain how long that will take.

Even those considered to be BJP supporters in the trading community—large parts of which continue to be in the informal sector even though the financial size may have grown bigger—have steadily begun speaking out about the adverse impact of the policy. The Confederation of All India Traders (CAIT) said in a statement: “Post-demonetisation, trade in the markets of the country has reduced to 25 per cent in comparison with normal days. Rural retailers from taluka and other mofussil areas who generally visit nearby district markets for procurement of goods had to remain at their respective places for want of sufficient funds of acceptable denomination. APMC [Agricultural Produce Market Committee] and mandis across the country had very less business as farmers who had brought their produce for sale in the market have to face a nightmare when he could not get money against his saleable produce due to non-availability of smaller denomination of notes. The logistics sector came to standstill as the truck drivers had only high denomination notes which caused blocks in smooth movement of transportation.”

To give a sense of how large the retail sector is and what an adverse impact on it could mean for the economy, the CAIT shared some figures: “It is estimated that the Indian retail trade is of about 42 lakh crore of rupees annually, resulting to approximately Rs.14 thousand crore per day, out of which about 40 per cent trade is conducted through Business to Business (B2B) whereas rest of the 60 per cent business is conducted through Business to Consumer (B2C) activities. Sixty per cent of the total retail trade is conducted in urban areas whereas rest of the 40 per cent trade is conducted in rural areas.”

Opposition politicians have naturally seen this as an opportunity to intervene. Back at the Azadpur Mandi, while discussing the losses in the apple trade, Nabi Ahmed also spoke animatedly about politics. On the day he spoke with this correspondent, Arvind Kejriwal and Mamata Banerjee were at the market and they spoke against the policy of demonetisation. Kejriwal mentioned the lack of trading activity at the market and called the policy “Independent India’s biggest scam”. While Ahmed was not sure about this claim, he agreed with Kejriwal’s larger message: demonetisation has affected the most vulnerable and poor unjustly and disproportionately. http://www.frontline.in/cover-story/ruined-livelihoods/article9373989.ece

1 Comment

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  1. The sudden withdrawal of more than 86% of currency has hit the small traders and vendors hard. Without any alternative arrangements, the employed workers in informal sectors are unable to get money for their sustenance. They are losing employment and source of livelihood.

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