From barter to credit: This is how rural India coping with the demonetisation cash crunch
"If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin."
- Charles Darwin
Just 35 kilometers away from Rajasthan's Sikar town, where normal life has given way to serpentine queues outside banks, the 'sin' is reflected not only in misery but also in the sheer ignorance of the residents of Bhagowa village.
Sitting outside his house on the outskirts of the village, Madanlal, a local farmer, seems far removed from any worry regarding money as he smokes his chillum.
When informed that the government has banned the old Rs 500 and Rs 1000 notes, he replies, "Mhan ke bero...mhar kan to hai koni...mhar kai farq pade hai...(Why would I care? I have no money in any case)."
His peers in the village agree. "Note band hone ki charcha to suni hai...par mahe to chain ki neend sowa haan...mhar kan to chain ka ek note bhi nahin hai (We have heard about the note ban. However, we are not losing sleep over this as we don't have even a single note of Rs 1000)," they say. Those few who were fortunate enough to possess these notes have opted to pay off old debts to the local grocers.
Over two dozens families of Bhagowa share the same sentiment. All of them make their ends meet through labour work or animal rearing. The only difference demonetisation has made to their lives is the decrease in the number of people coming to buy goats. Although some women do fear that they might not get their daily wages, if the cash crunch persists.
The number game
India has 2 lakh-odd ATMs. But only a quarter to them are in rural areas, which is where 69% of its people live.
For bank branches, the statistics is only marginally better at 39%. Worse, 51% farmer households are financially excluded from both formal and informal sources of banking.
Clearly, not every rural household has the luxury of being blissfully ignorant to the situation.
Considering that there were only 18.07 ATMs and 13 bank branches for every 1 lakh adults in India, the demonetisation woes for over 833 million rural Indians is proving to be an arduous one.
Just as the villagers in Bhagowa have put the old currency notes to good use by paying their debts, people are looking for other options to get cash.
In Udaipur's Dhariabad village, most illiterate people are going to touts to exchange the delegitimised notes. The rate of exchange of Rs 500 note is Rs 100, while Rs 1000 is being accepted for a commission of Rs 200. Most people in the district are hit by the lack of loose money in the market. This is making it difficult for them to sell vegetables or buy fertilisers.
The situation is no different in other parts of Rajasthan. In Alwar, people from the villages are coming to the ATMs with beddings as they know they might have to wait for the whole night for their turn. Even the common shopkeepers are now installing point of sales machines in the city for cashless transactions.
Going back in time
Meanwhile, demonetisation has turned the clock back to centuries in many parts of Uttar Pradesh.
Ganga Ram Verma is a farmer from Barabanki's Banikodar region who also runs a small business of grains. Finding that nobody was ready to buy his produce, he decided to barter it for seeds. Man Singh, another farmer from the area, has also used the grain stock to make payments to his farm labourers.
The promisary notes are giving way to promises of liberal credits from retail shopkeepers who are offering it for the next one month.
The note-ban has come as a bolt from the blue for most farmers as it is the cultivation season for potatoes and paddy.
"The barter system is back in practice. People are exchanging grains for necessary items. We are being forced to sell our crops at a lower price as we will have to sow seeds for the next crop," says Ram Saran Verma, a farmer from Daulatpur.
The situation is graver in the impoverished region of Bundelkhand that has received a good monsoon after years.
The barter system has returned to the rural economy in the hinterland of Chhattisgarh, which is also a Maoist hotbed.
In Surguja, in the Bastar region, not many people have seen banks even once in their lives. ATMs are still decades away from these regions. The villagers are taking the help of middlemen to exchange their notes. Those who cannot afford their fee are exchanging vegetables for food grains. The more affluent villagers are employing servants to stand in the queues outside the banks.
Even the Maoists in Chhattisgarh and Jharkhand are searching for innovative ways to circumvent demonetisation. Villagers are being offered commissions to deposit money in their Jan-Dhan accounts. Elsewhere, the insurgents are using conduits to turn their black money into white.
Just a day after the decision of note ban was made public, Jharkhand police arrested four men near Ranchi with a cash of Rs 25 lakh. The money allegedly belonged to Dinesh Gope, the leader of the proscribed People's Liberation Front of India. The accused were apparently going to deposit the money in the bank. Another trader was arrested on similar charges from Hazaribagh with cash money of over Rs 25 lakh.
A nursing home owner was gunned down in Saraikela-Kharsawan region allegedly for refusing to follow Naxals' diktat to help them exchange notes.
There are reports that some leaders are paying daily wages to the women associated with self-help groups for exchanging notes. However, the decision to mark the depositors using black ink has rendered this plan ineffective.
The poor hit the hardest
The poor in the villages of Punjab are now relying mainly on borrowings to deal with the crisis that has erupted after the demonetisation move by the central government. The worst hit is the farm labour which continues to work for the big farmers despite their daily wages getting delayed.
"The farmer is also genuinely effected when he says that he does not have cash to distribute it to us. We now find out that our wages will be paid after some days, but the problem is how do we survive today? We are also somehow managing on the daily needs like groceries being supplied to us on credit either from the local shopkeepers or the neighbours. But this will continue only till their own stocks last," said Fakir Singh, a labourer in Mandour village, Patiala.
In Himachal Pradesh, the problem has been compounded by the fact that most of the rural areas are catered to by the network of the co-operative banks.
"We are changing the old currency notes. But our problem is that the cash flow has trickled. If we place a demand for Rs 20 lakh, we are getting Rs 2 to Rs 5 lakh only. It is obvious that the cash is being supplied to the State Bank of India and its subsidiaries, other public sector banks and private banks on priority. We come at the tail end," said an employee of a co-operative bank in a remote area of Mandi.
He further disclosed, "Since we are a close knit community, we manage to convince the people that cash would be distributed to them on equitable. And they understand. This is helping everyone survive."
Himachal Pradesh has another advantage of being less populated and the population being spread over large areas.
"The worst affected are the people who have to organise weddings in their families. They are seen purchasing clothes and utensils on credit. Most of them had luckily purchased gold ornaments well in advance. Even the groceries for wedding feats are being provided by the traders on credit as they are unwilling to accept cheques. For people like us who deal with hardware, things have come to a standstill as people are waiting for get cash in hand so that they can proceed with construction or repair works. The impact of demonetisation is visible across the small villages," said Mohinder, a shopkeeper in Sundernagar area of Mandi.
The situation in Kashmir
Except for the first two days when around Rs 1,100 crore were deposited in J&K, around half of which went to the Valley, the demonetisation hasn't generated the level of chaos that was witnessed elsewhere in the country. A week after the announcement, the Valley is more or less back to normal. In Srinagar, the rush at the banks and the ATMs has drastically moderated, a state of affairs that many people put down to the uninterrupted shutdown of the past four months.
"The businesses have been largely shutdown and the money hasn't been in circulation," said Muhammad Afzal, a banker with J&K Bank. "This might be the reason for the customer rush to abate so soon."
In rural and the border areas too, there was little evidence of the panic. "The rush at our bank lasted for the first few days and then everything was same again," said a banker at J&K Bank in the border town of Uri.
However, the supply of the Rs 100 notes has been a problem. "We are short of Rs 100 notes. We stock our ATMs with a limited amount of cash which is taken out within the first hour or two itself," said an employee at the J&K Bank in North Kashmir town of Baramulla.
According to the famous rural affairs journalist, P Sainath, besides farmers, landless labourers, domestic servants, pensioners, petty traders and many other groups have taken a terrible hit due to demonetisation.
Harish Damodaran, another expert on the rural economy, argues that the cash crunch is going to take its toll on factories and farms, even if rural households find a way to cope with the situation.
Underlining the fact that hardly a tenth of India's workforce gets its salary in bank accounts, he fears the employers will have to lay off workers if the withdrawn currency is not replaced soon.
Edited by Jhinuk Sen