Jobless In Less-Cash Times

Policymakers in the NDA government continue to be in an overdrive to paint a rosy picture of a smooth transition to a “less-cash economy” post demonetisation, while deny­ing any adverse impact on ­employment or farmers. The ­situation on the ground and industry reports, however, reveal a contrary scenario. Though the situation has improved with the government raising the limit on cash withdrawals from banks and other financial institutions by ­individuals and corporates, there’s still an ­element of luck involved in whether your bank has enough funds on a given day to dispense the ­required amount or you would be asked to come again another day.

Most traders in Delhi’s wholesale and retail markets are still reluctant to ­undertake e-transactions, with many blaming their banks for not supplying the hardware required. Technical glitches and overburdened servers are also ­forcing people to continue with the old mode of cash transaction.

Prime Minister Narendra Modi’s New Year-eve handouts to the micro, small and medium industries and farmers may have helped improve sentiments, but the pain of coping with a tight cash flow continues to pinch. “We don’t agree with the government’s contention that there has been no job losses post demonetisation. The ground reality is quite ­different,” says Vrijesh Upadhyay, general secretary of the RSS-affiliated Bharatiya Mazdoor Sangh.

Pointing out that no full-fledged study has been done so far on demonetisation’s impact on jobs, Upadhyaya says a large number of contract workers have been hit, particularly in micro and small industries that operate largely on cash transactions. Many of these enterprises are “not registered and are, therefore, unable to get money from the banks for their operations”, he points out.

All India Trade Union Congress secretary D.L. Sachdev also rubbishes the government claims. “The finance minister is not telling the truth,” he says. “Our feedback is that there have been 40-50 per cent job losses across small and medium enterprises. Already, a process of reverse migration has started. Even some of the big industries, such as those in the automobile sector, have been keeping their plant idle due to the fall in demand.”

The Society of Indian Automobile Manufacturers (SIAM) data for Dec­ember shows that sales of passenger and commercial vehicles as also two- and three-wheelers dropped by 18.66 per cent to 12.22 lakhs, the steepest fall in 16 years. Similarly, real estate consultancy Knight Frank India has reported a steep 44 per cent year-on-year drop in home sales volume in Q4 of 2016 and 61 per cent year-on-year plunge in new projects during the same period.

Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises, which represents 743 associations, says the “impact of the demonetisation will be visible over the third and fourth quarters”.

Preliminary feedback from member ass­ociations reveals that most micro and small units that supply to big units or deal directly with traders are continuing to face problems, while the organised, bigger enterprises have been able to make a smooth transition to e-transactions with willing suppliers. “Things are better as money flows have improved, but demand remains low, except in export-led industries, which initially had problems in executing orders due to the cash crunch,” says Bhardwaj. “Most micro, small and medium enterprises are coming back on track after facing temporary work loss due to non-availability of funds.”

Given the subdued demand in major employment sectors such as real estate and automobile, which support large number of component and ancillary units, the demand for contract and casual labour has not revived.

K.E. Raghunathan, national president of the All India Manufacturers’ Organi­sation (AIMO), says demonetisation was initially welcomed as a good step, but “the findings of a quick survey till Decem­ber 12 turned the green lights to amber”. The preliminary study by AIMO reveals 30-40 per cent job losses across various sectors in just one month of dem­onetisation and expects job losses to rise significantly if the situation on the ground does not improve.

“The situation is surely alarming,” says Raghunathan. “We are still in the process of consolidating information on which industries are most affected and what needs to be done. Unless the money flow normalises and issues affecting the ind­ustry are addressed, it will only get worse. As in the case of the property market, if one industry is affected, all industries supplying to it get affected too.”

The impact has varied according to the nature and size of the industries, says Raghunathan, who goes on to explain that while the impact on the macro units has been visible immediately in the wake of the cash crunch, it would be discernible in the other sectors too as the payment cycles approach. Alleging that the policymakers have failed so far to acknowledge, address or find solutions to the issues hurting manufacturing and services, the real picture will be revealed only when the balance sheets of companies are prepared after March 31.

Pointing to the closure of operations of textile units in places like Surat or leather units in Kanpur, Agra and Muzaffarnagar, or the stalling of many building projects, Suneet Chopra of the All India Agricultural Workers Union says, “If there were no job losses, how did demand for NREGA work rise by 20-25 per cent in the villages of UP, Bihar, Madhya Pradesh and Rajasthan. Workers from all these states normally migrate to cities in search of jobs. Because of the cash crunch this year, many did not find field jobs even in Punjab. In fact, demonetisation did not hit the black economy, but the informal cash economy that has nothing to do with black money.”

 Trade union leaders representing farm workers and many agriculture experts describe the current government policies as “disastrous”. In fact, some feel these policies are akin to those in previous decades that resulted in the plundering of small producers in the name of containing food inflation.  This year, the cash crunch is being blamed for the financial ruin of many farmers. For want of buyers or a viable price, many are reported to have thrown their produce, such as onions, potatoes and tomatoes, on the street or in their fields.

“The government talks about four per cent growth in agriculture this year, but it is unlikely to translate into benefit for farmers,” says Sudhir Panwar, farm ­activist and member of the Uttar Pradesh Planning Commission. “Whe­ther onion or pulses, the spike in prices due to government policies benefits eit­her the import lobby or the overseas producers and domestic consumers, while farmers continue to be victims.”

In its 2014 election manifesto, the BJP had promised to implement the M.S. ­Swaminathan Committee formula—the procurement price of any agricultural commodity should be based on “production cost plus 50 per cent”—but it seems to have backed out since coming to power. Instead, in states like ­Uttar Pradesh and Madhya Pradesh, the ­Narendra Modi government has ­intervened to ensure discontinuation of incentives to farmers, both wheat and sugarcane growers. Moreover, market interventions like in the case of pulses, onion, rice and wheat have been more to benefit consumers and importers rather than farmers.

“Due to the limited understanding of the food system, the government’s priority is to rein in food inflation, not promote farmers’ prosperity,” says Ajay Vir Jakhar of the Bharat Krishak Samaj. A practising farmer, Jakhar points out, “What the government is doing is not opening up the market. Rather, by stopping exports (of rice) and pushing ­imports (pulses and wheat), it is trying to deflate farm-gate prices.”

Rebuffing the Opposition demand for yet another loan waiver scheme for ­farmers, Jakhar says, “Demonetisation has derailed the government’s objective of doubling farm income. Farmers are looking for a cure and not a pain-­relieving compensation (loan waivers).”

As the Modi government gears up to face the electorate in five states, it is only natural to expect that some of the pain of demonetisation may get reflected in the outcomes. For those living with job loss or wage loss or farm-gate income loss, it may be hard to vote in support.