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Plight of the migrants: Jobless labourers return home after demonetisation

Cash flows through the financial system may largely stabilise by the time we step into the new year, but no one is sure how long will it take to overcome the economic disruptions and dislocations caused by what now appears to be a highly flawed approach to tackling black money.

india Updated: Dec 12, 2016 13:45 IST
Diamond polishing is one of the cash-dependent industries which have been badly hit by demonetisation, forcing migrants to return home.
Diamond polishing is one of the cash-dependent industries which have been badly hit by demonetisation, forcing migrants to return home. (Siddharaj Solanki/HT Photo)

Twenty-three-year-old Avinash Kumar is planning to postpone his sister’s marriage. The money he had saved, working at a sweatshop in New Delhi’s Mongolpuri, is all but gone.

Kumar lost his job in about two weeks from the time Prime Minister Narendra Modi announced a ban on Rs 500 and Rs 1,000 notes, in a move that he termed as the biggest-ever offensive against black money. Kumar was among the millions of underclass Indians who cheered Modi for what they saw as a decision that may cause temporary disruptions but would benefit the nation’s longer-term interests. They were willing to weather the inconvenience and stand by their leader.

Lately though, people like Kumar are having rethink. Within days of the November 8 announcement, fresh orders dried up at the garment factory where Kumar worked; where most transactions, including payment of his wages, were in cash. A few days later, “my manager asked me to leave as he had no money to pay,” said Kumar who has since returned to Laxmipur, his native village in Gorakhpur, that counts among one India’s most impoverished.

“My manager asked me to leave as he had no money to pay. My sister’s wedding is planned for January, but I don’t see it happening.”

“My sister’s wedding is planned for January, but I don’t see it happening. All my savings are gone and no one will give a loan to a jobless youth,” said Kumar who is the sole bread winner in a family of four. Villages across Uttar Pradesh, Bihar, Bengal, Jharkhand and Odisha are seeing a steady spike in migrant workers returning home, according to dispatches from HT’s national network of journalists. They are returning from Kerala where the construction sector has come to a grinding halt; from Surat and other parts of Gujarat where diamond polishing mostly runs on cash; from Delhi and Mumbai and Punjab where labour-intensive businesses such as real estate and retail trade have been hit hard.

For those returning home, the narrative is slowly changing from temporary inconvenience to insecurity over livelihood. Umesh Sahni, a resident of Pakri Sahni Tola in the Muzaffarpur district of Bihar, has been calling his employer at a fish packaging company in Udaipur, to know when he can resume work. “They say wait until the cash flow normalises,’ said Sahni, who had come home on holiday just before demonetisation was announced. Anxious and confused, he asks, “When do you think, things will get normal?”

In a November 13 speech, the prime minister assured the people of the country that normalcy would return in 50 days. Cash flows through the financial system may largely stabilise by the time we step into the new year, but no one is sure how long will it take to overcome the economic disruptions and dislocations caused by what now appears to be a highly flawed approach to tackling black money. It was said demonetisation would help destroy dodgy cash, ease inflation, lower interest rates and accelerate economic growth.

Authorities now acknowledge that most of the Rs 15 lakh crore held in high denominations will return to the system, which means either there wasn’t much of dodgy cash in the system, or that the government failed to stop its conversion into legal wealth. Inflation has moderated only temporarily. Rising food prices coupled with a depreciating rupee and hardening global oil prices have kept the Reserve Bank of India (RBI) from cutting its key lending rate. The central bank has instead shifted the onus of reducing interest rates to commercial banks. As for growth, the RBI has been more optimistic in lowering its forecast for the current fiscal from 7.6 per cent to 7.1 per cent, said economist Renu Kohli, who has worked at RBI and the International Monetary Fund. Forecasters such as Goldman Sachs, see GDP growth slipping to 6.5 per cent this year. Worse, many do not see a turnaround soon. “India’s GDP growth in recent years has been driven mostly by consumption, while investment demand has been sluggish. Now consumption demand too has taken a hit,” said Kohli.

Then there is politics over demonetisation that has not allowed parliament to do any business since it opened for the winter session on November 6. It has also cast a shadow over the timely implementation of a unified goods and services tax (GST), the biggest-ever reform of India’s taxation system that could be a catalyst in accelerating economic growth.

It is imperative that the ruling coalition takes the Opposition into confidence while initiating such measures that cause largescale disruptions to people’s lives and livelihood systems. Instead, Prime Minister Modi has refused to debate the issue in Parliament.

To berate the Opposition, he even selectively picked a few lines from a famous Bob Dylan song in his video address to a Coldplay concert Mumbai organised last month.

“Come mothers and fathers throughout the land, and don’t criticise, what you can’t understand. Your sons and daughters are beyond your command … for the times they are a changing,” Modi recited. As political analyst Sumanta Banerjee wrote, the prime minister would do well to listen to Dylan and the end of his song: “There’s a battle outside ragin’, It should shake your windows, And rattle your walls …

LIVING ON THE EDGE
Demonetisation has unsettled employers too. There are salaries to be paid and cash transactions every step of the way.


 1  VINODBHAI: Vinodbhai, who has 35 polishing machines at his small-scale factory near Varachha in Gujarat, resumed operations on December 1. "My factory remained closed for 15 extra days after Diwali," he says. "Production costs this month will rise. I’ve managed some cash and told workers they’ll get paid this month in installments if they don’t open bank accounts."
 2  SHANTIBHAI DHANANI: The diamantaire re-opened his polishing unit in Surat on December 1, ten days behind schedule. He told his staff he couldn’t pay them cash. But he had to re-open, he couldn’t afford to shut shop any longer. Around 40% of the more than 4,000 cutting and polishing units in Surat have been affected by demonetisation.
 3  KULWANT SINGH: Despite a good potato crop, farmer Kulwant Singh of village Manki in Ludhiana is in trouble. With no currency in rural banks, cash flow at a standstill, potato traders aren’t coming forward to purchase produce and so, rates have crashed. "I can purchase pesticides or diesel on credit but labour and the transporter demand cash," says Singh.
 4  SANDEEP SINGH: Vegetable trader Sandeep Singh says sellers are not able to sell produce due to non-availability of cash, so they "aren’t coming to mandis to buy more. In the absence of buyers in mandis, traders are not purchasing produce from the farmers." He adds that due to fall in demand, prices have also crashed.

With inputs from Gaurav Saigal from Uttar Pradesh, Arun Kumar from Bihar, Hiral Dave from Gujarat and Gurpreet Nibber from Punjab.