In Its Third Month, India’s Cash Shortage Begins to Bite


Cii Radio| Ayesha Ismail| 25 January 2017| 26 Rabi ul Aakir 1438

New Delhi — First, Yashpal Singh Rathore’s marriage was delayed by his future in-laws, who, like most Indians, ran short of cash after Prime Minister Narendra Modi banned the country’s largest currency notes in November.

Then the 29-year-old lost his job when the ensuing cash crunch hit demand for motorcycles and scooters sold by the company where he worked, Hero MotoCorp Ltd. After that, the prospective in-laws refused to let the wedding go forward until he found another job.

“So I lost my job and I lost my marriage,” he said in an interview at a protest, where he shouted slogans with more than 100 red-flag-waving workers let go by Hero.

Mr. Rathore is one among a large number of Indians — the precise number is not known — who have lost their jobs since Nov. 8, when Mr. Modi abruptly banned 86 percent of the country’s currency in a bid to eliminate “black money,” currency on which taxes had not been paid.

For the sake of secrecy, the government largely avoided printing replacement notes in advance. So there has been an acute and protracted shortage of cash as the government struggles to catch up. That, in turn, has proved economically damaging.

Exactly how harmful remains hard to determine, but the available data is not reassuring. Demand for vegetables is declining because people don’t have the money to pay for them, for example, and some service industries are reporting steep job losses.

The International Monetary Fund this month cut its projected growth rate for India by one percentage point for the current fiscal year, to 6.6 percent. While the full impact is still difficult to discern, there is little doubt who is suffering the most. “This has actually hurt the poor enormously,” said Nasser Munjee, chairman of DCB Bank and a company director at HDFC and Tata Motors.

The pain is hidden, for the most part. Accustomed to hardship, many who lost employment were at first convinced by Mr. Modi’s speeches that their setbacks were transitory and, in the long run, would be worth the suffering. But as the crisis drags on, with no end in sight, some are growing frustrated, as they told us in a series of interviews at protests and at day labor gathering points.

Many of them, even children, are forced to go without fruit, vegetables and milk — now unaffordable luxuries. Most had not paid apartment rents and their children’s school fees in the months since the cash ban. Many had sent their families back to their villages, and were ready to give up and follow if things did not turn around soon. Sending cash to the elderly parents they had long supported is now out of the question.

As is common in India, the workers said that although they had worked on Hero MotoCorp’s shop floor, wearing company uniforms, they had been formally employed by other contractors, meaning they could be let go more easily without benefits.

Sunil Kumar, 28, who had been earning 15,000 rupees a month, about $220, at Hero, said he had been supporting his wife and two children when he lost his job without notice Nov. 29. They immediately cut milk, green vegetables and fruit from their diets, including for their 3-month-old and 3-year-old children. Paying rent is out of the question.

“This is like a massacre for us,” he said. “My livelihood is gone after the cash ban. What do I do now?”

The decline in vegetable demand is so steep that the prices of eggplants, potatoes, cauliflower and tomatoes dropped between 42 percent and 78 percent, the NCDEX Institute of Commodity Markets and Research said.

In the first month alone after the currency ban, micro and small-scale service industries cut staff by 35 percent, the All India Manufacturers’ Organization said, based on a survey. It released a study this month saying that job losses in a variety of industries, including automobile parts, infrastructure and construction, would swell to as much as 35 percent by March.

The anecdotal evidence is painful. Mr. Rathore, whose wedding was postponed, is among 582 workers who reported losing their jobs at Hero MotoCorp in November and December, as the company suffered a 34 percent drop in two-wheeler sales in December from a year earlier. Hero did not respond to requests for comment.

Most economists believe the economy will rebound, but nobody knows how long it will take.

In Noida, a satellite city of New Delhi, hundreds of unshaven men in rumpled clothing stood recently at a three-way intersection called Khoda Labor Chowk that is a gathering place for people seeking work.

Before the currency ban, they told us, they would be hired most days, earning 400 to 600 rupees, about $6 to $9, for a day of carpentry, floor tiling or masonry. But since the ban, most interviewed said, they had worked for only a week each month, at best, and even on the few days when they were hired their wages had fallen by half.

Rafiq Ali, 46, said that, having worked only 12 days in the last two months, he had sent his wife and two children back to his native village about 200 miles away, where it is cheaper to live.

“I am surviving on roti and potato with salt,” Mr. Ali said, referring to the flat Indian bread that is a staple in the Indian diet. “I’ve stopped taking milk, even in tea, and eating vegetables.”

But what hurt him most, he said, was a recent call from his wife, back in the village, who wanted money to take their sick daughter to a doctor. Mr. Ali said he had nothing to send.

“A sense of desperation and helplessness is emerging,” he said. “This currency ban is not helpful for poor people.”

Hoti Lal, a 38-year-old father of three, said he could get work for only six days during the last two months, forcing his family to survive on money his 18-year-old son made cleaning offices. Mr. Lal had hoped his son could give up that job to go to college, but that dream is fading fast.

His son’s salary of 7,000 rupees a month, a little over $100, is about half of what he used to earn regularly, Mr. Lal said. So, Mr. Lal said, his family has cut back entirely on green vegetables and milk.

Almost every man we interviewed said he was a migrant who had been sending a portion of his salary home to support his parents in his native village — and had been unable to do so since the currency ban wiped out work.

Vikas Sahu, 30, who had been working at Hero for four years, has been unable to send money back to his parents, wife and children, who live in his village about 100 miles west of New Delhi. His first grader’s school fees are overdue by months, and his father took out a loan of 70,000 rupees, about $1,000, for agricultural expenses, including paying for repairs on the family’s tractor.

“How long I can survive like this?” he asked.

With little else to do, Rakesh Yadav, 28, shows up most days to protest, hoping for some relief from the government or some upbeat economic news that might induce Hero to begin rehiring. He had worked there for eight years as a machine operator on the shop floor.

To cut costs, his wife and daughter went home to his village. He gave up the one room they had shared at a monthly rental of 3,300 rupees, or about $50, and moved in with four other men who share a room.

“I do not know where to go or what to do,” he said.

Mr. Rathore said he thought about giving up and returning to his village in Bilaspur district, about 750 miles south of Delhi, but he just cannot bear to do so, at least not yet.

“What can I do in my village?” he asked.

Source – NY times

File photo – An auto workshop in New Delhi. The worst affected by the cash crunch are the country’s hundreds of millions of farmers, produce vendors, small shop owners and daily-wage laborers who are usually paid in cash at the end of a day’s work. CreditTsering Topgyal/Associated Press