In the months following November 2016, it wasn’t just cash that was sucked out of the market. Consumer demand collapsed and traders found no takers for their products. And even a year later, the lingering effects of demonetisation continue to show on balance sheets.
In Hassan, the number of trips made by one transport company, taking stock from Bengaluru to Hassan, fell from 30 a month to single digits after the withdrawal of high denomination notes. “Things have improved, but they are still not to the extent they were before demonetisation. I used to employ six people before, but now I have reduced the number to four to cut my losses,” said Krishna, the owner.
Babu, a transport worker, now gets ₹300 as wage daily, down from ₹500, as the volume of parcels has reduced.
Nearby, Mohan Singh’s paper business continues to see a dip in business, with a fall in sales of nearly 20%. “I was hoping that things would improve at least a year after demonetisation. But it has not been the case. Printing units purchase papers depending on the work they get. As their business has come down, so has the sale of papers,” he said.
Meanwhile, the jaggery units concentrated around Alemane in Shivamogga district are yet to recover from the losses they suffered from having to shut down the industry for nearly 45 days. “We could not pay daily wages to our workers, and coupled with that, merchants stopped purchasing jaggery. This saw a slump in price from which we have not yet recovered,” said Lakshmiprasad K., who runs a unit at Seegebagi village.
This time last year, the price of jaggery was ₹4,500 a quintal. After demonetisation, for over four months the price crashed to ₹3,200. Since August, there has been a recovery, but the current price — ₹4,100 a quintal — remains significantly less than the average.
Dealing with cheques
It isn’t just in business losses the residues of demonetisation are to be seen.
Above the din of hectic auctions at the silk cocoon market at Ramanagaram comes a droll announcement asking farmers not to accept cheques or any form of payment other than cash. In a small room of sericulture officials above, farmers and traders are engaged in a loud argument, while over ₹12 lakh in cheques are cleared in a file — a reminder of the turbulent phase when cash was sucked out of the auctioning system after demonetisation was announced.
“We allowed payment by cheques till the end of February, but many farmers ended up receiving forged or invalid cheques. We have cleared around ₹3 lakh by threatening to blacklist traders, but the enticement of quick money is seeing many continue to offer cheques to gullible farmers,” said G.M. Munshi Basayya, Deputy Director of Sericulture.
The hope now is that the bounteous monsoons will wash away the slump in rural markets. “There is optimism because of the good monsoon, and we hope rural spending will increase. This will definitely reflect in the growth in the coming quarter,” said a member of the State-Level Bankers’ Committee.
Going cashless
In the months following demonetisation, the lack of cash forced many sectors to look for cashless means of business.
Thousands of fishermen in the coastal region have slowly adapted to payments through cheques and NEFT transfer. Those operating trawling boats, which go for fishing for days, have started paying in cheques (nearly ₹5.5 lakh a trip for diesel), while wages for crew members are paid online. “Paying by cheque has become a norm among trawl boat operators,” said an official from the Department of Fisheries.
However, the transition has not been easy. Trawling boat operator Chandra Suvarna said cashless transactions come with the problem of delay in cheque clearance, which then affects the working capital for immediate trips.
The unorganised beedi sector is on the verge of going into cashless mode. With cash payments becoming staggered, agents (who collect beedis from those rolling them at home) have been telling industry stakeholders, primarily operating in rural areas, to open bank accounts. But the opposition is evident. “How can you expect all of us to have bank accounts and operate them?” asked Kokila from Kalai, rather blithely.
Jan Dhan deposits down
A month after demonetisation, newly created Jan Dhan accounts were flush with cash, registering a nearly ₹1,500-crore increase in deposits in the 99 lakh plus accounts created under the Pradhan Mantri Jan Dhan Yojana.
In the subsequent months, as the norms on cash withdrawal became more relaxed, money started to flow out. As on Monday, just around ₹2,243 crore remained in the more than 1.1 crore bank accounts, down from over ₹3,096 crore deposited two weeks after demonetisation.
In the same period, nearly 20 lakh Rupay Cards were issued. State-Level Bankers’ Committee members said while the withdrawal trend is to be studied, farmers taking out money for agricultural needs could be a reason for declining deposits.
(With inputs from Sathish G.T. in Hassan, Veerendra P.M. in Shivamogga, Mohit M. Rao in Bengaluru, and Raghava M. in Mangaluru)
