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‘Is the pain worth it?’: 50 days after demonetisation, rural South India has a few questions

On November 9, life suddenly came to a standstill in Chikka Tirupathi, Bagalur and Hosur. As in the rest of India, the first day of demonetisation in these towns abutting the Karnataka-Tamil Nadu border was marked by problems in conducting day-to-day trading for small businesses and a frenzied hunt for Rs 100 notes for families.

The response to the government action was mixed on that first day. As the cash crunch sank in, small traders figured out that their businesses would take a hit until they replaced their Rs 500 and Rs 1,000 notes. Slightly larger enterprises, such as Jivita who runs a tailoring shop in Bagalur in Karnataka, were more optimistic. “We have enough money for rotation [working capital] for a week,” she said.

On the whole, it was a day of uncertainty. Notebandi was a sweeping decision. People weren’t sure how long it would take to exchange their old cash and for the situation to return to normal. At a branch of the Indian Bank in Bagalur, a bank official was calm. “We will open tomorrow morning,” he said. “People can come with their passbooks and exchange their notes.”

On December 28, Scroll.in travelled the 30 km stretch between Chikka Tirupathi and Hosur one more time. How were people we spoke to on Day One doing on Day 50?

That is it. The last story of 2016. It has been a good year. Intense and packed with learning. Now to see what 2017 is like.

Happy new year, too. 🙂

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An update from Patna’s Maroofganj mandi

ten days into #notebandi, patna’s Maroofganj mandi had frozen.

As demonetisation enters its second week, traders in Patna’s Maroofganj mandi are seeing something unprecedented.

In the last seven days, the supply of new stocks in this wholesale market, which supplies cooking oil, spices, rice, wheat and pulses to shopkeepers across Patna, has plummeted. The supply of cooking oil, for instance, is down by 80%.

Talk to traders selling spices, grains or pulses and you hear similar numbers. “Do you see how quiet this market is?” said an accountant at a rice shop. “Till 10 days ago, you would not have been able to walk down this street.”

In the same period, orders from shopkeepers have fallen steeply as well. Most of them cannot buy as much stock as before, said Abhijit Kumar, who runs a wholesale shop for spices, because they have only Rs 500 and Rs 1,000 notes – both derecognised as legal tender by the government.

The strange thing is: despite the contraction in both supply and demand, commodity prices are stable.

30 days later, around the 10th of December, i went back to the mandi seeking an update on how it is doing. Here is what we found.

Dilip Kumar Singh said the situation at the mandi was the result of some traders travelling to Gaya, Muzaffarpur and beyond to take advantage of low prices in parts of the hinterland. However, the traders this reporter met denied this. Instead, they flagged other concerns.

Sanjib Kesari, a wholesaler, said business had improved and more customers were now coming to the mandi. Prices, too, were moving – cooking oil, for instance, had risen Rs 3-Rs 4 in the last 20 or so days. But, the situation was nowhere near normal.

Wholesalers’ volumes remain modest. According to them, two factors are at work…

Ground report: In Bihar, murmurs of protest break the sullen silence against demonetisation

Banka was the last stop before returning to Patna in this reporter’s travels from North Bihar to South Bihar, to get a sense of how notebandi was impacting the structures of everyday life.

The journey had started with Raxaul, on the India-Nepal border, on November 18, exactly 10 days after notebandi was announced. Heading south, stopping at Bettiah, Gopalganj and Darbhanga and Gaya before reaching Bhagalpur, the common finding along the road was predictable.

As in other parts of the country, economic activity had fallen steeply in every town – be it Raxaul, Bettiah, Patna or elsewhere. In each of them, cash was in short supply, people were struggling to find work. Farm prices had collapsed in parts of the state. In other places, vegetables were being rerouted to bigger markets where there was still some purchasing power. Migrants had returned from the towns where they had been working.

Given this litany of hurt, what was less easy to understand was the popular reaction. As in the rest of India, despite grave difficulties, people had stayed calm. In the weeks gone by, several hypotheses had been advanced to explain this. Did people support notebandi despite difficulties? Did they think, as some people in a village near Gaya said, that notebandi would result in lower inflation and reduce inequality?

In that village, support for notebandi had stemmed from anger about greater inequity over land ownership. One zamindar owned 1,200 acres – which he had stopped giving out to his fellow villagers for sharecropping. The result? Every household in the village eked out a living by either working as labour in Gaya or migrating outside Bihar to work in brick kilns even as the land in their village lay fallow.

That explanation, interesting as it was, did not explain the calm in Bihar’s towns and cities.

And so, when we asked the people of Banka why they were silent, we got some fascinating answers — each far more convincing than the condescending bilge trotted out by pundits sitting far, far away.

Money is trickling into the banks of Bihar – but is not being distributed evenly

A month after Prime Minister Narendra Modi announced the scrapping of Rs 500 and Rs 1,000 notes on November 8, cash availability is starkly uneven across Bihar.

In relatively affluent parts of the capital city of Patna, the long queues outside ATMs seen in the first week of notebandi, when the government invalidated 86% of the currency in circulation, creating a massive cash crunch, are history. In poorer parts of the city, however, one can still see 50-odd people lined up outside ATMs at most times. Travel outside the capital and this pattern repeats itself.

In bigger towns, residents and bank managers said the cash flow has improved. In North Bihar’s Darbhanga, Ramakant Mishra, manager of a Punjab National Bank branch in Qila Ghat, brings out cheques encashed by his customers on November 30, the day this reporter visited his branch. Most cheques ranged between Rs 10,000 to Rs 24,000…

…However, venture deeper into the Gaya district and you will find that cash is just as hard to come by as it was in the days immediately after the demonetisation was announced.

Demonetisation: In a hamlet in Bihar, income and expenditure is down, but hopes are up

The last 30 days have not been easy for the people of Bhindu Paimar.

The standard demonetisation narrative has played out in this tola (hamlet) in Karjara panchayat in Gaya, Bihar, about 20 km from Gaya city, on the road that leads to the ancient Buddhist university of Nalanda.

Earnings have fallen. Most people in the village work as daily-wage workers in Gaya, earning anywhere between Rs 225 and Rs 250 a day.

Before demonetisation, we used to get work 20 days in a month, said Bhim Kumar, a young man in the village. However, the demand for labourers has dried up in the town since November 8 when the demonetisation announcement was made. At the same time, the local grameen bank is not letting people withdraw more than Rs 2,000 a week. “We are borrowing from here and there to make ends meet,” said Kumar.

Talk to others in the village – like Lallan Paswan, who has a small shop selling household provisions right next to the highway – and you hear a similar narrative. The monthly turnover at his shop is down by half. His monthly income has dropped from Rs 5,000 to Rs 2,500.

Despite these difficulties, support for demonetisation is high in this village, which is what this reporter also saw while travelling southwards from Raxaul, on the India-Nepal border, towards South Bihar. In Raxaul, Bettiah, Gopalganj, Darbhanga, Patna and now Gaya, public opinion has split over demonetisation.

This split is not easy to understand. Not everyone hurt by demonetisation opposes it. Similarly, not everyone relatively insulated from its worst fallouts supports it. In short, there are complex reactions to demonetisation.

The demonetisation effect on border town Raxaul: Income loss, dependence on Nepalese currency

My second field trip in Bihar took me from Patna to Raxaul in the far north. A couple of days there, and then I began trickling southwards. Bettiah. Gopalganj and then Darbhanga. And then Patna again. I will head further south tomorrow — towards Gaya — before turning northeast towards Nalanda and then straight east for Bhagalpur. The task of trying to understand how Bihar is doing continues to flummox and bewilder. Along the way, I am also trying to understand how DeMonetisation is affecting the people of Bihar. This was the first dispatch from the north. On its impacts at Raxaul, and how public opinion is split over “notebandi”.

Cauliflower sells for Rs one a kilo in Bihar as demonetisation depresses demand

At first glance, it looks like any other day at the mandi in Bettiah.

Trucks stand next to the concrete arch that leads into the fruit and vegetable market in this small town in northern Bihar. Inside the mandi samiti, as the precinct is called, hawkers sit with baskets bursting with vegetables. The shops seem well-stocked.

But the abnormality shows up when you ask traders and hawkers about the impact of the government’s decision to demonetise Rs 500 and Rs 1,000 notes. Vegetable prices have collapsed, they say.

Cauliflower or phool gobhi, said Mahfooz Alam, a wholesaler at the mandi, was selling for Rs 12 a kilo just before the announcement on November 8. “It is now selling for one or two rupees.”

The prices began to fall within 2-3 days of the Prime Minister’s announcement on November 8, said Muhammad Islam, a fruit trader.

Baingan (aubergine) fell from Rs 15 per kilo to Rs 2-Rs 3. Patta gobhi (lettuce) has slumped from Rs 15 per kilo to Rs 5. And saag (spinach) has dropped from Rs 10 to Rs 2.50 per kilo.

These are jaw-dropping falls. What explains them?