As citizens, there may be a valuable lesson for us to learn from this.

The recent removal of 2000 rupee notes may have little impact on the economy as they only make up a small portion of cash in circulation (10.8%). However, depositing these notes is a burdensome and unproductive for the public and bank staff. It baffles me why the central bank and Government would even consider doing this, as the notes could be gradually removed without causing immediate harm. It feels like Prime Minister Modi is giving us citizens homework to do.

The Reserve Bank of India (RBI) recently announced that the total value of banknotes in circulation has decreased from ₹6.73 lakh crore to ₹3.62 lakh crore, which accounts for only 10.8% of the total Notes in Circulation. This presents a significant challenge for the RBI. To help with the exchange of ₹2000 banknotes, the RBI has set up a deposit facility. However, it is crucial to conduct a thorough analysis to understand the scale of the problem, the underlying assumptions, and the significant effort required to successfully address this task within the limited timeframe.

The main goal is to deposit and retrieve ₹3.62 lakh crore within the given timeframe.

Assumptions:

● Each individual is allowed to deposit up to ₹20,000 per visit.

● The deposit process consumes approximately 10 minutes per visit.

● Banks operate for 270 working days a year.

● An average workday consists of 8 hours.

Required Effort: Based on our analysis of the assumptions, it has been determined that depositing ₹3.62 lakh crore would require around 18.1 crore trips, each taking an estimated 10 minutes per deposit. This amounts to a total of 3,017 crore work hours. With only 122 working days left (30 Sept 2023) until the deadline. A workforce of roughly 3,867,431 Bank staff members would need to be engaged to achieve this.

There may be disagreements about the specific number and assumptions, but altering them would still result in a significant amount of unproductive work. We must consider the opportunity cost, as the staff involved in this task would have to disengage from more productive work. Furthermore, we have yet to assess the impact on those who travel to the bank to make deposits, considering their opportunity cost. This exercise is ultimately a waste of resources and causes a massive loss of productivity.

It would be advisable for the RBI to increase the deposit limit, extend the period, or abandon it altogether, as the economy is still recovering from crises such as inflation, external pressures, weak local demand, and struggling MSME sectors.

Appendix

Calculations:

● Total trips required: ₹3.62 lakh crore / ₹20,000 = 18.1 crore trips.

● Total hours required: 18.1 crore trips * 10 minutes per trip = 3,017 crore work hours.

● Total working hours available per staff: 8 hours per day * 122 days = 976 hours.

● Staff required: 3,017 crore work hours / 976 hours = 3,867,431 staff members.

The author a financial professional with a master’s degree in economics. He is interested in the arts, academia, and social issues related to development and human rights.

Also Read:

Part 1: “Demonetisation: Modi’s Himalayan Blunder and its Lingering Consequences”

Related:

Challenge to demonetisation not academic : SC seeks affidavits of both Union & RBI, including RBI decisions at the time

RBI data reveals demonetization was a failure, 99% of banned cash recovered

Money Mayhem – Demonetisation Cartoons

Demonetisation: The grandest of blunders made by anyone in Indian political history?

Modi’s RBI and its myopic monetary measures

The post Addressing Mammoth Task of Depositing ₹3.62 Lakh Crore (2,000 Rs Notes) : Scale, Assumptions & Effort (Part 2) appeared first on SabrangIndia.

In 2016, the Indian government introduced a demonetisation policy. At that time, India’s cash-to-GDP ratio was only 12%, lower than Japan’s 20%, Germany’s 15%, and Switzerland’s 10%. The majority of cash in circulation were 500 and 1000 rupee notes. Before the policy, currency in circulation had steadily increased and reached 16.42 lakh crore rupees. As of March 2022, the Indian currency in circulation has significantly risen to Rs 31.33 lakh crore from Rs 13 lakh crore in 2014. The demonetisation policy is still a significant disaster in India’s economic history.

It’s important to mention that RBI favoured increasing cash circulation before the demonetisation event. You can find more information in the attached article.

https://thewire.in/economy/india-gdp-demonetisation

During the fiscal year 2022, the proportion of currency in circulation (CIC) to India’s gross domestic product (GDP) was almost 14%. Following the demonetisation in 2017, the CIC ratio significantly increased once again.

Share of currency in circulation to GDP in India from the financial year 2015 to 2022

‘Velocity’ of money and Currency Denomination 

The ‘Velocity’ of money measures how quickly money is exchanged in an economy, indicating the economic activity level. For instance, if ten people use 100 rupees within a specific time frame, it generates an economy worth 1000 rupees, showing the impact of money circulation. The ‘Velocity’ of money is a crucial factor in determining economic health because it reflects how often and how fast money moves within an economy, driving transactions and promoting economic development.

In the economy, the denomination of currency plays a vital role in the ‘Velocity.’  of Money.

To understand this concept, let’s use an example where you have a 200-gram weight and a weighing machine. Giving your neighbour 130 grams of sugar using a 200-gram weight would be impossible. You can measure accurately if you have standard weights like 100 grams, 20 grams, or 10 grams, and a standard set of weights allows you to provide or sell the desired weight.

Similarly, if you want to purchase something for 130 Rupees, it’s crucial to have a combination of currency denominations that adds up to that amount. Having 100-Rs, 20-Rs and 10-Rs notes would allow you to pay seamlessly. In contrast, having only one unit note would be impractical and inconvenient, and a high-value denomination like a 2000 unit note would be challenging to use for smaller transactions efficiently.

To ensure smooth transactions, currency notes come in various denominations that align with the average ticket size of transactions in a country. For example, the Reserve Bank considers typical transaction amounts when printing money in India. By providing a range of denominations, currency notes enable practical and convenient transactions, allowing individuals to make payments efficiently according to the value of goods and services they purchase.

Demonetisation – November 8, 2016.

On the day of demonetisation, a massive sum of 16.43 L crore was withdrawn from the economy, leaving a void that needed to be filled. Let us use an example to understand the options available.

● Printing only 2000 Rs notes 821.5 crores of 2000 rupee notes

● Printing 50% 100 Rs and 50% 500 Rs notes 8.215 lakh crores of 100 rupee notes and 1.643 lakh crores of 500 rupee notes.

During demonetisation, it would have been quicker to print 2000 rupee notes compared to 500 and 100 rupee notes. This could have influenced the decision to print more 2000 rupee notes to speed up remonetisation. The decision to demonetise was likely made only a few days before the event, and the RBI had to print the necessary currency without seeking expert opinions or following a well-planned program.

The abrupt elimination of currency caused chaos and difficulties, leading to despair and loss of life. When the economy was re-monetised, the circulation of only 2000 rupee notes worsened the situation. The effects of demonetisation were significant – the ‘Velocity’ of money decreased significantly due to a lack of currency, bringing the economy to a halt; the introduction of the 2000 rupee notes delayed the recovery accentuating the problem and hurting the economy further.

It was a tough time for everyone involved, and the effects were felt for a long time.

Conclusions 

If you struggle with being overweight, you cannot run like a ‘forest gump’ and lose weight overnight. Creating a plan that includes exercise and a healthy diet is essential.

In the same way, transforming the economy is a gradual process, and military terms like “surgical strikes” are just marketing tactics that don’t address the issues at hand. Demonetisation was a disastrous step that revealed a crucial lack of economic understanding, and it disrupted the circulation of money, and introducing the 2000 rupee note only further delayed recovery.

The RBI reports that the value of these banknotes in circulation has gone down from ₹6.73 lakh crore on March 31, 2018, which accounted for 37.3% of all notes in circulation, to ₹3.62 lakh crore on March 31, 2023. This now represents only 10.8% of all notes in circulation.The discontinuation of the 2000 rupee note and the deposit limit of ₹20,000 per visit creates unproductive work for banking staff. The impact on those who travel to make deposits and the opportunity cost are still unknown. This exercise is a waste of resources and causes a loss of productivity.

It would have been prudent if the Reserve Bank of India had gradually reduced circulation without a big announcement.

The mistake made in 2016 by a leader who acted without seeking consensus or expert advice has become even more apparent. Unfortunately, we are all now paying the price for this decision.

The author is a financial professional with a master’s degree in economics. He is interested in the arts, academia, and social issues related to development and human rights.

Also Read:

Part 2: Addressing Mammoth Task of Depositing ₹3.62 Lakh Crore (2,000 Rs Notes) :  Scale, Assumptions & Effort

Related:

Challenge to demonetisation not academic : SC seeks affidavits of both Union & RBI, including RBI decisions at the time

RBI data reveals demonetization was a failure, 99% of banned cash recovered

Money Mayhem – Demonetisation Cartoons

Demonetisation: The grandest of blunders made by anyone in Indian political history?

Modi’s RBI and its myopic monetary measures

The post “Demonetisation: Modi’s Himalayan Blunder and its Lingering Consequences” (Part 1) appeared first on SabrangIndia.

A five-judge constitution bench on Wednesday, October 9,  expressed serious displeasure over the Union government’s unparalleled request for adjourning the hearing on a batch of petitions challenging the demonetisation announced by Prime Minister Narendra Modi in 2016. While the unilateral move that is perceived by many to have been singularly responsible for destroying India’s informal economy and striking a deliberate blow to the MSME sector (micro, small and medium scale enterprises), the government has never failed in the electoral domain, since November 2016, to ‘celebrate’ the move!

In the Supreme Court, however. 2,192 days and six years later, however, clearly, it is still looking for valid answers.

It was Attorney General R Venkataramani who pleaded for more time to file the Centre’s affidavit. He expressed his regrets for seeking an adjournment of the proceedings.

However, senior advocate Shyam Divan, appearing for one of the petitioners, opposed this plea, contending it has never been an accepted practice to seek deferment of proceedings before a constitution bench. Divan said the petitioners should be allowed to argue while the government and RBI may take their own time to file the affidavits.

When this request was made by the AG by the union government for an adjournment of hearing on a batch of petitions, Justice BV Nagarathna says ‘it’s very embarrassing for the court’

“Normally, a constitution bench never adjourns like this. We never rise like this once we have started. It is very embarrassing for this court,” Justice B.V. Nagarathna remarked when attorney-general R. Venkataramani made the unusual statement at the commencement of the proceedings that the affidavit was not ready.

Tuesday, November 8, 2022, was the sixth anniversary of the demonetisation announcement by Modi. By the time the constitution bench assembled on Wednesday, 2,192 days had passed since the recall of high-denomination notes was sprung on the country. No veteran person, jurist or observer,  associated with the court could recall another occasion when an adjournment had been sought before a constitution bench.

Normally, Supreme Court benches sit in a combination of two judges and, at times, three judges. Only on matters relating to constitutional validity, a five-judge or a larger bench sits. Setting up a constitution bench is an arduous task as regular benches have to be shuffled, which affects the functioning of the court.

“My profuse apologies. We could not get the affidavit ready,” attorney-general Venkataramani told the court.  We require a short indulgence of about a week. I would say that the affidavit we file will be useful for all of us to proceed in the case in some structured way. Otherwise, the course of action may be unnavigated. We will place it by next Wednesday or Thursday. I am deeply sorry for this delay,” Venkataramani added.

Senior advocate Shyam Divan, appearing for some of the petitioners, opposed the plea of the attorney-general. He said there was no precedent when an adjournment was sought before a constitution bench.

“As far as I am aware, it has been the practice of this court that when a constitution bench is hearing a matter, the practice is not to ask for an adjournment. Each one of us here is aware of it. A constitution bench has the highest priority. Therefore, when the attorney-general makes a request such as this, it is something unusual. I am in an awkward position and I do not know how to respond,” Divan submitted.

The senior counsel said despite the Centre’s request, the bench can continue with the proceedings and hear the arguments for several other petitioners. Venkataramani conceded that such requests are not made before a constitution bench. “I admit that all of us are aware that we do not make a request like this before a constitution bench. But there are some serious issues on account of which we are making the request. Therefore, I have made this request.”

Justice S.A. Nazeer, heading the bench, said the court would grant a short adjournment of one week. The other judges on the bench are Justices B.R. Gavai, A.S. Bopannaand V. Ramasubramanian, besides Justice Nagarathna. On October 12, the bench had directed the Centre and the RBI to file comprehensive affidavits to justify the decision to demonetise Rs 500 and Rs 1,000 currency notes as it rejected the government’s argument that the 2016 decision had only academic interest and the hearing was a “waste of the court’s time”. 

The constitution bench is expected to answer several questions that have been mired around this issue, the unilateral demonetisation move all these six  years.

Background

The present constitution bench of the Supreme Court (SC), is finally hearing a batch of 58 petitions filed against demonetisation post November 2016 was persuaded by the petitioners to change its preliminary view that the challenge to demonetisation has become an academic issue. The hearings began on October 12. The batch of 58 petitions, pending since 2016 –six years–challenge the decision taken by the Central Government to demonetise the currency notes of Rupees 500 and 1000 denominations.

At the conclusion of arguments for that day, the Court asked the Union of India and the Reserve Bank of India to file a comprehensive affidavit in response to the petitioners’ arguments, especially the one that Section 26(2) of the Reserve Bank of India Act does not authorise the Union to completely cancel currency notes of particular denominations. The petitioners have argued that Section 26(2) empowers the Centre to cancel currency notes of a particular series and not the entire currency notes.

It had then been reported by Livelaw that the bench had said that it wanted to see the documents relating to the RBI Board meetings ahead of the announcement of the demonetisation.

At the last hearing in mid-October, senior lawyers appearing for the petitioners raised the argument that the Government lacked the power to cancel the currency notes through an executive order and stressed that the issues hold relevance for the future as well.

Arguments

P Chidambaram, former union home minister, arguing one of the matters, said that the demonetisation carried out in 1978 was through a separate Act of the Parliament unlike the 2016 decision. So, the legal issue whether the Section 24 and 26 of the Reserve Bank of India Act can be invoked to demonetise currency notes is very much alive. If the issue is not settled, the government can repeat the same in future. “Whether the demonetisation of this kind withdrawing 86% of currency notes in circulation requires a separate law by the Parliament”, Chidambaram framed the question.

Seemingly moved by Chidambaram’s arguments, the bench turned to the Attorney General seeking his response.  Chidambaram stressed that the issue was not about advisory jurisdiction but about the declaration of law. He referred to Article 142 of the Constitution to say that the Supreme Court has the power to declare what is the correct law. He also highlighted that 86% notes were rendered invalid by the decision. In the previous instances of demonitisation, the currency notes which were withdrawn were not much in circulation, as they were of denomination of Rs 10,000 and Rs 5,000.

Divan read out the issues formulated in the reference order for the bench. He highlighted that the Supreme Court had withdrawn to itself the cases from High Courts and barred other courts from entertaining petitions on this subject. He also pointed out that a Constitution Bench in 1996 had decided whether the 1978 demonetisation was legal.

The bench asked whether the 1978 demonetisation was similar to the 2016 decision. Divan replied that the answer can be “yes” and “no”. “Yes” to the extent that similar questions relating to powers of the Government to take the action arise. “No” to the extent that the 2016 decision was different in its magnitude, as the 1978 demonetisation was for extremely high value denominations which were rare in circulation. The senior counsel also pointed out that his client was someone who had missed out the window for exchanging notes since he was abroad during the relevant time for a surgery. “It is our hard-earned money, which was rendered naught. It is not some abstract, academic question”.

“The point is, the wisdom of the government is one aspect of the matter and we know where the lakshman rekha is. But the manner in which it is done and the procedure is something which can be examined. But for that, we need to hear”, Justice Nagarathna stated. “Any declaration one way or the other is for posterity and I feel it is the duty of the Constitution Bench to answer it one way or other”, Justice Nagarathna added.

Demonetisation deconstructed

Months after the sudden and unilateral decision of the prime minister, RBI data had revealed that demonetization was a failure, 99% of banned cash recovered: Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized, was recovered.

The move cost India and Indians, especially small and informal business a lot. In 2018, the Reserve Bank of India (RBI) in its annual report announced that as many as 99.3 per cent of the old Rs. 500 and Rs. 1,000 notes that were banned overnight in November 2016, were returned. Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized was recovered, proving that the move was a massive failure.
 
The “humungous task of processing and verification of specified bank notes (SBNs) was successfully achieved,” the RBI report said.
 
“The SBNs received were verified, counted and processed in the sophisticated high-speed currency verification and processing system (CVPS) for accuracy and genuineness and then shredded, it added. SBNs refer to the demonetised old 500 and 1,000 rupee. “The total SBNs returned from circulation is Rs 15,310.73 billion,” the RBI said in its report.
 
The cost of demonetisation

Last year, the RBI said that its cost of printing currency notes in 2016-17 had doubled to Rs. 7,965 crore from Rs. 3,421 crore in the previous year due to demonetisation.
 
“This means that just Rs 10,720 crore of Rs 500 and Rs 1,000 notes failed to come back to the RBI, as against expectations that over Rs 3 lakh crore of black money would not return to the banking system. The sudden withdrawal of notes in 2016 had created a liquidity shortage, with long queues outside banks and people undergoing immense hardship across the country. It had also roiled the economy, with demand falling, businesses facing a crisis, and GDP growth declining close to 1.5 per cent. Many small units were hit hard, with many reporting huge losses even after nine months,” reported Indian Express.

The Guardian reported that 1.5 million jobs were lost due to the move. “The figures suggest prime minister Narendra Modi’s demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5m jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy — a key rationale for the move,” it said.
 
“Industry sources said that even by conservative estimates, at least 12 lakh workers lost their jobs due to the “twin blows” of demonetisation and GST in key sectors like textiles, auto spares, ceramics and engineering goods. In all, if one adds up available government data and industry estimates, the unemployment figure is a staggering 32 lakh,” said a report.

Barkha Dutt in Washington Post: Writing for Washington Post, Barkha argued that in a country where 90% of the transactions were made in cash, the announcement of invalidation of Rs 1000 and Rs 500 notes was meant to shut down the parallel economy run by tax evaders but due to bad planning people ended up being harassed.

Drawing a parallel with former prime minister Indira Gandhi’s speech in early seventies, Barkha wrote, “The audacity of Modi’s demonetization decision and the centralization of power it represents has drawn many parallels with Indira’s actions in the 1970s. His notes ban has especially drawn comparisons with Gandhi’s move to nationalize India’s banks in 1969.”

“Modi’s blend of disruptive individualism, strongman politics and old-style welfare economics falls back on more government, rather than less, as the primary vehicle of change. The ’70s deja vu has confirmed one thing — “Modinomics” is not quite the right-of-center Thatcherite model that many of his supporters may have expected. Indeed, in India, we are back to the future,” Dutt had added.

Related:

Challenge to demonetisation not academic : SC seeks affidavits of both Union & RBI, including RBI decisions at the time

RBI data reveals demonetization was a failure, 99% of banned cash recovered

Money Mayhem – Demonetisation Cartoons

Demonetisation: The grandest of blunders made by anyone in Indian political history?

Modi’s RBI and its myopic monetary measures

The post Embarrassing’, SC pulls up Modi govt for failing to file affidavit: Demonitisation appeared first on SabrangIndia.

The constitution bench of the Supreme Court (SC), hearing a batch of 58 petitions filed against demonetisation post November 2016 was persuaded by the petitioners to change its preliminary view that the challenge to demonetisation has become an academic issue. Beginning today, Wednesday, October 12 the SC began hearing the legal arguments raised by petitioners on merits.

At the conclusion of arguments for the day, the Court asked the Union of India and the Reserve Bank of India to file a comprehensive affidavit in response to the petitioners’ arguments, especially the one that Section 26(2) of the Reserve Bank of India Act does not authorise the Union to completely cancel currency notes of particular denominations. The petitioners have argued that Section 26(2) empowers the Centre to cancel currency notes of a particular series and not the entire currency notes.

Ignificantly, Livelaw reported that the bench also said that it wants to see the documents relating to the RBI Board meetings ahead of the announcement of the demonetisation. The case will be next considered on November 9.

The Constitution Bench comprises of Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna and is considering 58 petitions which challenge the decision taken by the Central Government to demonetise the currency notes of Rupees 500 and 1000 denominations.

On the previous hearing date (September 28), the Court had observed that it will first examine whether the petitions challenging demonetisation have become academic.

While both the newly-appointed, Attorney General for India R Venkataramani and Solicitor General of India Tushar Mehta  asserted through the day that the issue has become academic in view of the passage of 6 years, senior sdvocates P Chidambaram and Shyam Divan contended that the validity of the Central Government’s decision was still open to challenge. The senior lawyers appearing for the petitioners raised the argument that the Government lacked the power to cancel the currency notes through an executive order and stressed that the issues hold relevance for the future as well.

Persuaded by the petitioners’ arguments, the bench observed that the issue may not have become academic. The bench also said that it has the duty to answer the issues referred to it by the Constitution Bench and that it has to answer them “one way or the other for posterity”.

Arguments

Solicitor General of India Tushar Mehta’s argument that Court’s time need not be “wasted” on academic issues was met with a sharp rebuttal from senior advocate, Shyam Divan. Divan, appearing for some petitioners, expressed astonishment at the expression “wastage of time” when issues of constitutional importance have been referred. Divan said that he has produced a compilation of the various orders passed by the Constitution Bench and also smaller benches indicating the issues involved in the case. The SC had also said that

individual cases of hardships could be addressed independently. 

Attorney General for India R Venkataramani expressed the view that the issues are now academic. “When the Act is not challenged, the notifications cannot be challenged, that too without a context. The issues are academic and there are political implications”, the AG said.

“If the issue has academic, there is no point in wasting the court’s time. Should we take this up at this stage after passage of time? We can deal with individual issues”, Justice Nazeer suggested.

P Chidambaram said that the demonetisation carried out in 1978 was through a separate Act of the Parliament unlike the 2016 decision. So, the legal issue whether the Section 24 and 26 of the Reserve Bank of India Act can be invoked to demonetise currency notes is very much alive. If the issue is not settled, the government can repeat the same in future. “Whether the demonetisation of this kind withdrawing 86% of currency notes in circulation requires a separate law by the Parliament”, Chidambaram framed the question.

Seemingly moved by Chidambaram’s arguments, the bench turned to the Attorney General seeking his response.  Venkatramani then questioned whether the SC was functioning in its capacity of advisory jurisdiction, but the Judges (both Bopanna and Gavai) commented that the issue is where such actions can be unilaterally be taken in the future. Justice Nazeer also remarked that several landmark judgments of the Supreme Court came in “advisory” jurisdiction and cited the example of SR Bommai case.

Chidambaram stressed that the issue was not about advisory jurisdiction but about the declaration of law. He referred to Article 142 of the Constitution to say that the Supreme Court has the power to declare what is the correct law. He also highlighted that 86% notes were rendered invalid by the decision. In the previous instances of demonitisation, the currency notes which were withdrawn were not much in circulation, as they were of denomination of Rs 10,000 and Rs 5,000.

Solicitor General intervened at this juncture to say that the Courts have not applied the doctrine of proportionality with respect to the economic decisions taken by the Government.

At this juncture, the judges of the bench had a discussion among themselves for a few while. Later, the bench said that it will allow the petitioners to raise their arguments and will grant time to the Centre to respond.

Divan read out the issues formulated in the reference order for the bench. He highlighted that the Supreme Court had withdrawn to itself the cases from High Courts and barred other courts from entertaining petitions on this subject. He also pointed out that a Constitution Bench in 1996 had decided whether the 1978 demonetisation was legal.

The bench asked whether the 1978 demonetisation was similar to the 2016 decision. Divan replied that the answer can be “yes” and “no”. “Yes” to the extent that similar questions relating to powers of the Government to take the action arise. “No” to the extent that the 2016 decision was different in its magnitude, as the 1978 demonetisation was for extremely high value denominations which were rare in circulation. The senior counsel also pointed out that his client was someone who had missed out the window for exchanging notes since he was abroad during the relevant time for a surgery. “It is our hard-earned money, which was rendered naught. It is not some abstract, academic question”.

“The point is, the wisdom of the government is one aspect of the matter and we know where the lakshman rekha is. But the manner in which it is done and the procedure is something which can be examined. But for that, we need to hear”, Justice Nagarathna stated.

“Any declaration one way or the other is for posterity and I feel it is the duty of the Constitution Bench to answer it one way or other”, Justice Nagarathna added.

The AG said that when “momentous decisions” are taken by the government, several aspects are taken into consideration. Justice Nagarathna replied that those aspects will be certainly considered while answering the issues.

(Based on reporting by LiveLaw)

Demonetisation deconstructed

Months after the sudden and uniliateral decision of the prime minister, RBI data had revealed that demonetization was a failure, 99% of banned cash recovered: Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized, was recovered.

The move cost India and Indians, especially small and informal business a lot. In 2018, the Reserve Bank of India (RBI) in its annual report announced that as many as 99.3 per cent of the old Rs. 500 and Rs. 1,000 notes that were banned overnight in November 2016, were returned. Rs. 15.31 lakh crore of the Rs 15.41 lakh crore demonetized was recovered, proving that the move was a massive failure.

 

The “humungous task of processing and verification of specified bank notes (SBNs) was successfully achieved,” the RBI report said.

 

“The SBNs received were verified, counted and processed in the sophisticated high-speed currency verification and processing system (CVPS) for accuracy and genuineness and then shredded, it added. SBNs refer to the demonetised old 500 and 1,000 rupee. “The total SBNs returned from circulation is Rs 15,310.73 billion,” the RBI said in its report.

 

The cost of demonetisation

Last year, the RBI said that its cost of printing currency notes in 2016-17 had doubled to Rs. 7,965 crore from Rs. 3,421 crore in the previous year due to demonetisation.

 

“This means that just Rs 10,720 crore of Rs 500 and Rs 1,000 notes failed to come back to the RBI, as against expectations that over Rs 3 lakh crore of black money would not return to the banking system. The sudden withdrawal of notes in 2016 had created a liquidity shortage, with long queues outside banks and people undergoing immense hardship across the country. It had also roiled the economy, with demand falling, businesses facing a crisis, and GDP growth declining close to 1.5 per cent. Many small units were hit hard, with many reporting huge losses even after nine months,” reported Indian Express.

 

The Guardian reported that 1.5 million jobs were lost due to the move. “The figures suggest prime minister Narendra Modi’s demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5m jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy — a key rationale for the move,” it said.

 

“Industry sources said that even by conservative estimates, at least 12 lakh workers lost their jobs due to the “twin blows” of demonetisation and GST in key sectors like textiles, auto spares, ceramics and engineering goods. In all, if one adds up available government data and industry estimates, the unemployment figure is a staggering 32 lakh,” said a report.

Barkha Dutt in Washington Post: Writing for Washington Post, Barkha argued that in a country where 90% of the transactions were made in cash, the announcement of invalidation of Rs 1000 and Rs 500 notes was meant to shut down the parallel economy run by tax evaders but due to bad planning people ended up being harassed.

Drawing a parallel with former prime minister Indira Gandhi’s speech in early seventies, Barkha wrote, “The audacity of Modi’s demonetization decision and the centralization of power it represents has drawn many parallels with Indira’s actions in the 1970s. His notes ban has especially drawn comparisons with Gandhi’s move to nationalize India’s banks in 1969.”

“Modi’s blend of disruptive individualism, strongman politics and old-style welfare economics falls back on more government, rather than less, as the primary vehicle of change. The ’70s deja vu has confirmed one thing — “Modinomics” is not quite the right-of-center Thatcherite model that many of his supporters may have expected. Indeed, in India, we are back to the future,” Dutt had added.

Related:

RBI data reveals demonetization was a failure, 99% of banned cash recovered

Money Mayhem – Demonetisation Cartoons

Demonetisation: The grandest of blunders made by anyone in Indian political history?

Modi’s RBI and its myopic monetary measures

The post Challenge to demonetisation not academic : SC seeks affidavits of both Union & RBI, including RBI decisions at the time appeared first on SabrangIndia.

Chief General Manager of the RBI, Yogesh Dayal said that it was following RBI’s (sudden) directions, that depositors could not withdraw more than Rs 1,000 of the total balance in their savings/current/other deposit accounts.

The bank has been barred from granting, renewing and loans and advances, make any investments, accept fresh deposits, etc. without the prior written approval from RBI.This hascaused distress to a lot of common people, who had their life’s savings in the banks. Several reports highlighted the sense of shock and panic that prevailed among the citizens.

Many called the move similar to demonetization, which was executed without proper planning or information and had caused widespread chaos. Moreover the move had exposed the fault-lines in Indian economy. That time, BJP supporters had hailed the move saying that it will bring ‘black money’ back to the country. However, RBI’s yesterday’s move has left some of these supporters flustered.

Ashoke Pandit, the co-producer of the film The Accidental Prime Minister, a supposed biopic on former PM Manmohan Singh, who also likes to call himself a ‘social activist’ and ‘conservationist’ said, “..this sudden order has created unnecessary chaos”.

Some of these 2019 skeptics had even called demonetization as “surgical strike”
 

 
Demonetisation of high-value currency notes — Rs 500 and Rs 1,000 notes — that constituted 86.4 per cent of the money in circulation in November 2016 was justified by saying that it is a step taken to bring back money that was out of the banking system. The government initially expected currency only worth Rs 10 lakh crore to be returned to banks. However, the government and the RBI faced criticism because most of the currency in circulation was recovered, and only 1.04 per cent was not returned. The total value of invalidated Rs 500 and Rs 1,000 notes at the time of demonetisation was Rs 15.44 lakh crore, out of which only Rs 16,000 crore was not returned to the RBI.

Some users also said that first the government asks people not to keep cash, but then it stops the operations of banks and restricts online transactions. So what was one supposed to do?

“And what should the account holder do on receiving this http://message.Rs 1k is all that we can withdraw over 6 months. We stopped keeping cash at home because you encouraged online transaction and now we can’t even withdraw our own hard earned money.

@nsitharaman
#pmcbank”

 
Related Articles:
1.RBI data reveals demonetization was a failure, 99% of banned cash recovered
2. RBI directors raised objections but “rubber-stamped” demonetisation anyway
 
 

The post How Bhakts turn Skeptics: Hailing Demonetization then, distressed by moves at PMC bank today appeared first on SabrangIndia.

In the “golden days”, Ashok Kumar (centre) worked at a Haryana plywood factory for Rs 15,000 and saved nearly a fourth of his salary. After demonetisation and the introduction of the Goods and Services Tax, Kumar lost his job and now finds itinerant work at Fawara Chowk in Haryana’s Yamunanagar for no more than 10 days a month, earning Rs 6,000 or less.

That was before November 2016, when Prime Minister Narendra Modi announced demonetisation, withdrawing 86%, by value, of India’s currency. “I received November’s salary in January and it was only downhill from there,” said Kumar, as he waited–dressed in an old sweater and worn slippers–in this northern Haryana town at Fawara Chowk, an open-air labour market, for an itinerant job.

Then came the Goods and Services Tax (GST)–criticised for its shoddy implementation–in July 2017, and his factory cut about 110 of 200 jobs, including Kumar’s. With no cash in circulation and a 28% GST on the manufacturing and sale of plywood, thousands who sought work here–from Uttar Pradesh, Punjab, Uttarakhand and other northern states–bore the consequences.

The plywood industry’s annual turnover dropped from Rs 16,000 crore in 2016 to Rs 12,000 crore now, said Devendra Chawla, national president of the All India Plywood Manufacturers’ Association. He estimated that nearly 350 plywood manufacturing units shut down, as did 500 units supplying raw material; production at more than 100 units was halved, and thousands of unorganised sector employees lost their jobs. There are estimated to be 1,000 plywood industry units in Yamunanagar.

Kumar has a mother, wife, two sons and a daughter to support. Waiting for an employer to pick him up–he explained how his monthly employment had dwindled to between seven and 10 days and his monthly income fallen by about a third to Rs 4,000-6,000. His wife now works as domestic help, earning Rs 6,000, but that was not enough to end their “suffering”, he said.

After demonetisation, payments were delayed due to the sudden cash crisis, which brought down the industry, said Ankur Jain, owner of Mahaveer Plywood. “In the plywood industry, one has to buy wood every day. We had no funds to buy raw material, and we also could not pay for the manufacture of raw material which we had earlier purchased.”

When he first came to Fawara Chowk–”fountain square”–to find work, Kumar had to wait a week before he was hired to unload wood for Rs 300 a day. He travels 20 km each way by bus or cycle to his mud home in a slum outside town.

Kumar represents India’s failing demographic dividend–the economic growth that accrues from a large working-age population–and its crisis-ridden farms. Forced to drop out of school when his father, a farm labourer died, he found a secure government job impossible. Options for a class-10 dropout, Kumar admitted, were “limited”. India’s demographic opportunity stretches longer than any other country, from 2005-06 to 2055-56, but falling fertility rates mean the window of opportunity is closing for many states, according to a 2018 United Nations Population Fund (UNFPA) report. It has already closed for Kerala and Tamil Nadu.

“Every day while leaving home, I think of whether I will find work,” said Kumar, “Or if I will have to return home empty-handed.”

This is the ninth of an 11-part series reported from labour hubs across the country–places where unskilled and semi-skilled workers gather to seek contract jobs–to track employment in India’s informal sector. (The previous stories were from Indore, Jaipur, Perumbavoor,  Ahmedabad, Kolkata, Lucknow, Bengaluru and Bathinda.)

This sector, which absorbs the country’s mass of illiterate, semi-educated and qualified-but-jobless people, employs 92% of India’s workforce, according to a 2016 International Labour Organization study that used government data.

By delving into the lives and hopes of informal workers, this series provides a reported perspective to ongoing national controversies over job losses after demonetisation and the rollout of the Goods and Services Tax in July 2017. The number of jobs declined by a third over four years to 2018, according to a survey by the All India Manufacturers’ Organisation, which polled 34,700 of its 300,000 member-units. In 2018 alone, 11 million jobs were lost, mostly in the unorganised rural sector, according to data from the CMIE.

Daybreak at Fawara Chowk

Fawara Chowk in Yamunanagar sees about 1,500-2,000 labourers like Kumar every day. Most of these labourers, from across Haryana and neighbouring states such as Uttar Pradesh, had worked in plywood units that either retrenched workers or simply shut down. The number of workers at the hub has “doubled and tripled” since the implementation of demonetisation and GST, a labourer said.

Fawara Chowk in Yamunanagar sees about 1,500-2,000 labourers every day. Most of these labourers, from across Haryana and neighbouring states such as Uttar Pradesh, had worked in plywood units that either retrenched workers or simply shut down.

The labour hub wakes up earlier than other parts of the city. Around 6 a.m., workers start trickling in–the earlier they arrive, the higher the chances of finding work, we were told. The chowk is situated at the heart of the city, with roads connecting to the Yamunanagar bus depot and Jagadhri railway station. Several shops selling cosmetics and clothes, mostly knock-off brands, and other knick-knacks, dot the area. The narrow lanes are filled with bicycles, tongas (horse-carts) and scooters.

Workers standing in small groups looked up expectantly at every passing truck or rickshaw. Finally a contractor arrived and started sizing up the workers who surrounded him: the younger, the better. Those who do get recruited earn around Rs 300 a day for jobs in construction, painting, loading/unloading of wood and similar jobs. Before demonetisation, workers here used to get paid around Rs 500-Rs 600 a day, we were told.
Sundar Lal, 45, used to earn around Rs 12,000 at a plywood manufacturing unit till it was hit by demonetisation. He earns less than half now–Rs 4,000-Rs 5,000–as a daily wage labourer.

Sundar Lal, 45, used to earn around Rs 12,000 at a plywood manufacturing unit till it was hit by demonetisation. He earns less than half now–Rs 4,000-Rs 5,000–as a daily wage labourer.

Lal, a Class-5 dropout in a kurta-pajama and tattered slippers, deals with a tough daily commute to the chowk. His home is in Sarsawa in Uttar Pradesh’s Saharanpur district, a hut in a slum settlement 28 km away. He takes a bus to the labour hub, and a one-way ticket costs him Rs 25. And he is not lucky everyday. The best he can hope for is 10-12 days of work a month at a daily wage of Rs 250-300, half what he used to earn once.

The five-member Lal family is struggling to stay afloat–just water and electricity bills total up to Rs 200. Lal’s wife works as a farm labourer and earns just Rs 2,000-Rs 3,000 a month. Their two daughters take care of the household while their son works at a tea shop where he earns Rs 3,000 a month.

Lal said he has “no choice” but to agree to low wages because the labour market is full of desperate workers willing to settle for the same or even less. “How will my family survive if I don’t work at low wages?” he asked. On most days, unable to afford vegetables or dal (lentils), the family has roti with just salt.

Promise of jobs did not materialise

Haryana will elect a new state government in October 2019. In the 2014 state assembly elections, the Bharatiya Janata Party (BJP) under Manohar Lal Khattar’s leadership won 47 of the 80 assembly seats, defeating the Congress led by Bhupinder Singh Hooda and the Indian National Lok Dal led by Om Prakash Chautala.

In a state plagued by a job crisis and farmer distress, the BJP had released a manifesto that appealed to all sections of society. It had guaranteed the youth 100 days of work, a monthly stipend of Rs 6,000 for Class 12 graduates and of Rs 9,000 for college graduates. The party had also promised loans of up to Rs 1 crore to those wishing to set up new businesses and a minimum wage of Rs 300.

But an RTI reply revealed that of the 1,521,854 youths who registered under various employment programmes in 2014-2018, only 647 (0.042%) had found a job. The applicants were mostly from districts like Jind, Faridabad, Rohtak and Yamunanagar.

Haryana’s unemployment rate is the third highest in the country, at 19%, behind only Chandigarh (22.7%) and Tripura (22.9%), showed data provided by the Centre for Monitoring Indian Economy, as of March 2019. In October 2016–a month before demonetisation was announced–the unemployment rate was 9.8%, and this rose to 15.4% in December 2016. A year later, in October 2017, the unemployment rate rose to 14.3% and went even higher in October 2018, to 18.7%. December 2018 recorded an unemployment rate of 24.5%, the highest yet since January 2016.

“It will not be wrong to say unskilled labourers work like bonded workers,” said PP Kapoor, an RTI activist who has been working independently for labour rights in the state. He traced the problem to “faulty” government policies and the lack of attention to workers’ welfare. Workers were not getting minimum wages, not being paid regularly, were deprived of good medical facilities and were offered no options for rehabilitation in the event of job loss.

Nayeb Singh Saini, Haryana’s labour minister, denied these charges. “The government has been working continuously for the welfare and social security of labourers,” he told IndiaSpend.

Schemes had been implemented to ensure worker welfare, he said, pointing out that more youngsters have been brought into the job-guarantee programme under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS); there is compensation for workers in case of death; health insurance for workers and their dependents and free health services to families living below the poverty line. The minimum wage, too, had been increased regularly, he pointed out–between January and June 2017 it was Rs 318.46 for an unskilled worker and this was increased to Rs 339.51 by January to June 2019. (Minimum wages are fixed for six-month periods.)

Under the Haryana Building and Other Construction Workers (BOCW) board, workers are entitled to benefits such as pension for those above 60, loans for home construction, insurance for labourers and their immediate dependents, maternity benefits, financial assistance for children’s education and so on. As of September 2018, 776,000 workers has registered under this scheme. However, the number of beneficiaries is unclear.

Data on the MGNREGS website, as of April 27, 2019, showed that of the 1.6 million workers registered, only 638,000 (40%) are currently active. The average number of employment days provided per household in the financial year 2018-2019 was 33.73, against the 100 guaranteed. And the average daily wage was Rs 281.27, 17.51% less than the minimum wage prescribed by the state.

At Fawara Chowk, all that workers want is for the government, any government, to create jobs across various industries and raise/standardise wages. They will now support any party that comes up with the most workable job creation strategy and promises to “revive” the state’s plywood industry.

A flourishing job hub in disarray

Haryana’s Yamunanagar, situated on the banks of the river Yamuna, acquired two plywood manufacturing units in the early 1980s.
In the early-to-mid-90s, when agroforestry was being promoted, the plywood industry in Yamunanagar was thriving and by 2014, it had reached its peak, said Chawla. The area alone contributed more than 60% to the country’s plywood market, but the downfall began with demonetisation, followed by GST, he added.

Mohan Lal, 65, has worked for over 30 years in a Yamunanagar plywood factory. Today, the man who was once an expert in cutting plywood, seeks odd jobs at construction sites dressed in a torn shirt and trousers.

Mohan Lal, 65, has worked for over 30 years in a Yamunanagar plywood factory. Today, the man who was once an expert in cutting plywood, seeks odd jobs at construction sites. His income dropped from Rs 16,000 a month before demonetisation, to Rs 3,000-Rs 5,000 now.

Lal and his family used to live comfortably on the Rs 16,000 he earned and there were Sundays and government holidays off. They lived in a basic but comfortable one-bedroom home in the Old Hamida area of Yamunanagar.

Demonetisation sent Lal’s life into a spin. The plywood factory where he worked shut down. The job loss and cash-crunch forced him to relocate his family to a kutcha (makeshift) house in a slum in Sarsawa, Saharanpur–about 28 km from Fawara Chowk. After struggling to find a job in plywood units that struggled to stay afloat, he started working as a daily wage worker. Even a year after demonetisation, he could find only five to seven days’ work a month at a daily wage of Rs 250-Rs 300. His monthly income dropped to between Rs 3,000 and Rs 5,000. His sons live separately; one works as a cleaner at a government school while the other works as a watchman at a night market. His wife is ailing and unable to work.

Yamunanagar has lost its reputation as a destination for job seekers, said Satish Dhiman, president of Pehar, an organisation working for unorganised sector workers. “The government has failed to safeguard the rights of thousands of workers and their families,” he said, denying government claims about the success of employment schemes.

One unit shut, another may shut soon: Owner

Ankur Jain, the owner of six plywood manufacturing units in Haryana, claimed that another 40% of Yamunanagar’s plywood factories shut down by March, 2019. He himself employed 129 workers but had to fire more than half of them after demonetisation. This year, he was forced to shut down one of his six units due to increasing losses and may wind up one more. The 49-year-old has two children in college and is “stressed” about affording their tuition fees.

Both demonetisation and hasty implementation of GST have left the plywood industry in a panic, said Neeraj Garg, a chartered accountant and financial advisor to several units.

The fall of the plywood industry was also impacted by the collapse of the construction sector, said Garg. Earlier, material was supplied to Maharashtra, Gujarat, Delhi, Uttar Pradesh and other parts of the country from here. However, demonetisation crippled the construction sector and pulled down demand for plywood by about 40%, he said.

Plywood prices are expected to rise too–before demonetisation, the price of raw wood was Rs 150 per quintal, now it has gone up to Rs 700, said Arshu Mehta, a 46-year-old plywood businessman in Yamunanagar.

Earlier, under the control of the state forest department, plywood factories were issued licenses based on the availability of wood. Between 2011 and 2017, no licenses were issued to open up plywood manufacturing units. However, in 2018, the BJP government opened licensing applications for plywood units without carrying out an inventory of the amount of wood available.

There has been a demand and supply mismatch in the state, since enough poplar and safeda (eucalyptus) trees have not been planted in the last 10 years in Haryana and this has led to a shortage in wood supply and an increase in prices, said Mehta.

Mehta alone had to fire 22 permanent, 43 contract and 50 other labourers from a single unit; production at another unit came down to less than half. Not only have labourers been fired, the ones remaining either received a pay cut or did not get a raise. At Mehta’s factory, labourers earned about Rs 15,000 before demonetisation and some earned another Rs 4,000 for overtime. Now, more than half his workforce have lost their jobs and the ones who are still employed, have received pay cuts and lost out on benefits such as overtime.

To protest against 28% GST, in 2017, more than 1,100 plywood units in the state went on an indefinite strike. They demanded that GST be brought down to 18%, which the government agreed to.

However, Yamunanagar’s plywood industry is yet to recover.

(Thakur is a Chandigarh-based freelance writer and a member of 101Reporters.com, a pan-India network of grassroots reporters.)

Courtesy: India Spend

The post Demonetisation And The End of Ashok Kumar’s Golden Days appeared first on SabrangIndia.

Punjab, once one of the prosperous states in India, is now reeling under a crisis. Lack of jobs and demonetisation have crippled the lives of daily wagers, whose families now depend on micro loans to run households. They squarely blame the central government for their plight. NewsClick talked to daily wage workers in Patiala to find out what they feel about politics and elections.

Courtesy: News Click

The post Wait, Despair and Hope: Fate of Daily Wage Labourers in Punjab appeared first on SabrangIndia.

The Malgodam labour hub in Mansa, 60 kms from Bhatinda, is close to the railway station; nearly 100-150 daily wage labourers visit every day. Most are hired by private contractors for load carrying, cleaning and other minor construction work.

Since the end of 2016, he has returned home disappointed most days. The best he could hope for were about 10 days of work in a month, he said.

Poverty drove Balkara out of school when he was in Class 2 and his only dream was to see his children–aged four and six–complete their education. His small house in Amargarh village where he lives with his wife, children and parents, is about 14 km from Gol Diggi. It takes two bus changes and Rs 30 to reach the hub.

When we met Balkara in early April 2019, he was no longer sure if his dream would ever come true. The move by the Narendra Modi government in November 2016 to withdraw 86% of India’s currency, by value, had knocked the bottom out of the casual jobs sector which ran on cash payments–agriculture, small scale textile units, unorganised retail businesses, and tourism as IndiaSpend has reported.

Five million men, mostly from the unorganised sector, lost their jobs over the two years following demonetisation, said a new report ‘State of Working India 2019’. This latest estimate of job losses was published by the Centre for Sustainable Employment (CSE), Azim Premji University, Bengaluru, and released on April 16, 2019. The numbers would have spiralled if women were to be included in the study.

As Punjab votes on May 19 in the ongoing general elections to the Lok Sabha, we look into the state’s informal jobs crisis.

The unemployment rate in Punjab in November 2016–when demonetisation was announced–was 4.9%, which increased to 6.1% in December 2016 according to the Centre for Monitoring Indian Economy, a consultancy. This  unemployment rate reached 8.9% in June 2017 and further increased to 9.2% on the first anniversary of demonetisation in November 2017. In October 2018, the figure reached 11.7%, and by February 2019, recorded 12.4%.

The jobs at Gol Diggi were among the several millions that disappeared. Balkara, who managed to earn Rs 15,000 a month, now barely scrapes together Rs 9,000. Almost every worker we spoke to at Gol Diggi reported daily wages dropping–from Rs 450-Rs 550 before demonetisation to less than Rs 300 now. Towards the end of the month when families run out of savings and desperation sets in, this plunges to Rs 200.

Soon after demonetisation, the construction industry had “literally came to a standstill”, Balkara recalled, and there was a time when he worked barely four days a month. The casual job scene has rallied around somewhat but it is still not as vibrant as it was before, he said.

You hear stories like this across the Gol Diggi labour market, located at the heart of Bathinda’s commercial centre and surrounded by showrooms that sell expensive brands. From 8 am every morning, around 100-150 daily wage workers gather at the hub seeking cleaning, carpentry and masonry jobs among others.

The contractors arrive here in trucks and seek out workers willing to settle for low wages. There was a time when workers were in short supply in this market. Now, by 11:40-11:45, panic sets in among the workers who haven’t been picked. More than 60 of them could be seen going from one contractor to another pleading for jobs with folded hands. Most end up agreeing to wages as low as Rs 150-Rs 200 while the official minimum wage is Rs 311.12 for an unskilled labourer and Rs 375.62 for a skilled labourer.

This is the eighth of an 11-part series (you can read the first part here, second here, third here, fourth here, fifth here, sixth here, and seventh here) reported from nationwide labour hubs–places where unskilled and semi-skilled workers gather to seek contract jobs–to track employment in India’s informal sector. This sector, which absorbs the country’s mass of illiterate, semi-educated and qualified-but-jobless people, employs 92% of India’s workforce, according to a 2016 International Labour Organization study that used government data.

By delving into the lives and hopes of informal workers, this series provides a reported perspective to ongoing national controversies over job losses after demonetisation and the rollout of the Goods and Services Tax in July 2017. The number of jobs declined by a third over four years to 2018, according to a survey by the All India Manufacturers’ Organisation, which polled 34,700 of its 300,000 member-units. In 2018 alone, 11 million jobs were lost, mostly in the unorganised rural sector, according to data from the CMIE.

Daily wages are up but few jobs

In 2017, the Shiromani Akali Dal (SAD) and the Bharatiya Janata Party-led alliance was defeated by the Congress in Punjab’s state assembly elections. The disappointment with the SAD alliance was so acute that its seat count fell 73% from 56 in the 2012 elections to just 15 in 2017. Amarinder Singh, the new chief minister, came to power promising to address the two biggest issues plaguing the state: unemployment and drug use.

Soon after it came to power, the new government launched its flagship double mission, Ghar Ghar Rozgar (a job for every home) and Karobar (business) Mission that promised every family a source of income. More than 550,000 youth have been offered jobs since the launch of the scheme, the CM said at a job fair in Jalandhar in February 2019. Between September 2017 and February 28, 2019, 37,542 youth have been given government jobs, the CM claimed.

Around 171,000 individuals had been placed with the private sector and around 365,000 helped under self-employment schemes through loans ranging from Rs 50,000 to Rs 100,000 at low interest rates, a government press release said.

The District Bureaus of Employment and Enterprises, established in September 2017 across all districts in Punjab, aimed at coordinating and implementing government employment schemes. The state would train 50,000 youth under various skill development schemes in 2019-20, said Charanjit Singh Channi, minister of employment generation and technical education. In February 2019, the state government signed an MoU to provide Punjabi youth with an internationally-recognised training for jobs in the construction sector. The programme included basic training in construction skills like carpentry and masonry work.

In 2018, the Congress-led state government fixed Rs 341.12 as minimum daily wage for semi-skilled labour, Rs 311.12 for an unskilled worker and Rs 375.62 for a skilled one. Most workers at the Gol Diggi told us that they are forced to settle for less. In 2016, just before demonetisation, the minimum wage for a semi-skilled worker was lower, Rs 317.28.

However, labourers then earned more, anything between Rs 350-500 a day. Today, the rate for both skilled and unskilled workers has severely fallen, workers told us.

‘I get work maybe 10 days a month now’

Sixty-two-year-old Sachha Singh covers his faded pink turban with a shawl to protect himself from the morning glare as he waits to be picked for a job at Gol Diggi. In 2009, the uneducated labourer, who was a private mason, started taking on daily wage work.

Saccha Singh lives with his wife, son, daughter-in-law and two grandchildren in a compact one-room house in Lal Singh Nagar, about 5 km from Gol Diggi. While his house has access to electricity, residents in the area often complain about getting contaminated water.

Demonetisation and its aftermath came a shock for Sachha and his family. Till then, he could earn upto Rs 500 for a day’s work and found work at least 20 days a month. After November 2016, his wage fell to Rs 350, and then slid to Rs 250 by month-end.

The family runs on Sachha’s salary of around Rs 3,500 a month and his son’s monthly earning of Rs 8,000 as a security guard at a local factory. “Soon after demonetisation, there were days when all I earned was Rs 1,400 an entire month,” he said.

Private mason Sachha Singh, 62, whom we met at Bathinda’s Gold Diggi market, started taking on daily wage work in 2009. Before demonetisation, he earned upto Rs 500 for a day’s work. After November 2016, this fell to Rs 350, and then slid to Rs 250 by month-end.

Demonetisation caused widespread panic not only amongst the working class, but even among small industrialists across Punjab, said DP Maur, general secretary of the Joint Council of Trade Unions. At least 10,000-15,000 unskilled contract workers in Ludhiana–across industries that produce cycles, hosiery and auto parts among others–might have lost their jobs after demonetisation, he said. An exact figure is hard to ascertain because Punjab’s industries mostly employ unorganised workers, he said.

Different labour hub, same woes

After an entire day of waiting for odd jobs at the Malgodam labour market of Mansa district in northern Punjab, Ram Singh, 67, simply returns home with a few vegetables. Mansa is nearly 60 km from Bathinda and here too we heard the same stories of joblessness in the informal sector.

Lean and frail, Ram Singh is an illiterate worker who takes up jobs like cleaning, load carrying or helping masons and carpenters. Since 2008, he has been travelling 8 km by bus from his village, Nangal Kalan, to the labour hub, paying Rs 20 daily. He lives with his wife, son, daughter-in-law and two grandchildren in a small house. His son works as a contract labourer at a factory in Mansa, while his daughter-in-law works in a field as an agricultural labourer. Together, the family earns about Rs 11,000 every month.

The family has had to cut down drastically on its daily expenses, and drop pulses from their meals. There were times immediately after demonetisation, Ram said, when he was able to find just two days work a month.

His average daily wage fell from Rs 350 to less than Rs 230 now. The family’s reduced income has also affected the grandchildren, both of whom are in school. Ram cannot afford to purchase new books for his granddaughter and she has had to make do with her elder brother’s books these last two years.

The Malgodam labour hub in Mansa is close to the railway station; nearly 100-150 daily wage labourers visit every day. Most are hired by private contractors for load carrying, cleaning and other minor construction work. Before demonetisation, about 150 labours would wait at the area for work. Immediately after demonetisation, the number fell to 50-60 but is now gradually increasing.

The adjoining shoe market that primarily sells Punjabi juttis is often visited by labourers and locals. Labourers start trickling in by 7 am and those who do not get work, wait till 11 am. Around 12:30 pm, a group of another 30-40 labourers visit the area for half-day wage work. Contractors land up on bicycles to locate workers.

Unskilled workers seek basic jobs like cleaning and load carrying. Skilled workers are marked by the bags of tools they carry. Every job deal is only finalised after hard negotiations over wages.

Gora Singh, 35, a Class 2 dropout and an unskilled labourer, can no longer send his two sons to school. “I have no money to buy books or uniforms for them,” he said.

He has been visiting the labour hub since 2013. Before demonetisation, he managed to find more than 20 days’ work a month; today he is happy if he gets even two weeks. He earns about Rs 3,000 a month now and his wife earns Rs 3,500 working as a domestic helper. If it is the month end and the family’s savings dip, he will settle for Rs 150 as daily wage. The family lives about 2 km from the labour hub in a one-bedroom house, paying Rs 800 as rent. Singh walks to work and back to save bus fare.

Gora Singh, 35, an unskilled labourer, has been visiting the Malgodam labour hub in Mansa city since 2013. Before demonetisation, he managed to find more than 20 days’ work a month; today he is happy if he gets even two weeks’.

Labour contractors took the blow too

Labour contractors across the state’s job hubs are stressed too, we found. The wages have risen beyond pre-demonetisation rates and there are not enough workers across various sectors. Since there are no fixed rates or wages, the cut taken by the labour contractor varies widely.

Jagtar Singh, 48, is a labour contractor from Mansa, who usually hires for the brick kilns in the district. The labour market has splintered post-demonetisation making it difficult for anyone with a stake in it to survive, he said.

“A large number of workers who earlier worked as daily wagers have shifted to agricultural labour after demonetisation left them with no work,” he said. Though agricultural workers only get seasonal employment, currently there is perennial demand for them, Singh added.

Before demonetisation, Jagtar Singh, a Class 4 dropout, employed about 16 labourers (eight groups of husbands and wives) at a brick kiln, but now is left with only eight workers. Brick kilns have yet to recover from the shock dealt by demonetisation on the construction industry in Punjab. Jagtar Singh’s monthly income has fallen from Rs 34,000 to Rs 20,000.

Migrant workers get paid even less

A large chunk of the casual worker population–including migrants–in Punjab gets agricultural employment only for 50 days a year during wheat harvesting, paddy sowing and paddy harvesting seasons, as per Lakhwinder Singh, an economist at Punjabi University in Patiala.

Of all these tasks, only paddy sowing requires some prior experience or knowledge. So the agriculture sector tends to absorb the least skilled workers.

The brick kilns of Punjab also employ a large number of migrant workers. While local labourers know their rights, migrant workers are often paid less than the minimum wage, we found. The wage rate is usually fixed per 1,000 bricks at kilns.

Jagtar employs both local and migrant workers. A couple could earn about Rs 10,000 a month before demonetisation; this is now down to Rs 7,500, he said.  

GST landed the next big blow

Medium and small enterprises in Punjab have been doubly affected by demonetisation and GST. Cheap imports from China had already impacted these enterprises when demonetisation crippled them, said Badish Jindal, former vice chairman of National Productivity Council (NPC) and president of Federation of Punjab Small Industries Association.

“While demonetisation forced industrial units to lay off workers, the implementation of GST made them spend resources to understand these taxes and file them under the new regime,” he said. “Both demonetisation and GST did not go well for the cash economy.”

Rajinder Kumar, 40, is a cable operator in Mansa. He managed nearly 15,000 cable connections before demonetisation and GST, which is now down to less than 12,000. While big direct-to-home services could slash prices to make up for the GST paid by customers, operators like Kumar had to deal with losses. “After the implementation of GST, our cable connection became costlier by nearly by Rs 100,” he said. “People cut cable connections and opted for cheaper DTH links run by national giants.”

This is the seventh of 11 reports. The previous stories were from: Indore, Jaipur, Perumbavoor,  Ahmedabad, Kolkata, Lucknow and Bengaluru.

(Sharma is a Ludhiana-based freelance writer and a member of 101Reporters.com, a pan-India network of grassroots reporters.)

Courtesy: India Spend

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Speaking at the election campaign of the Samajwadi Party’s Lucknow candidate, Poonam Sinha, Yashwant said, “The questions is, why is Prime Minister Narendra Modi not talking about demonetization (in his poll campaigns) which, according to him, was the decision of the century? Why is he not mentioning demonetization in his poll speeches? It was a scam worth more than several lakh crores and I would like to request the new government to investigate this matter as soon as they form the government.”

Further taking a dig at the Modi government for forging the economic data, Yashwant said, “Neither our Prime Minister nor the finance minister (Arun Jaitley) know anything about the economy. The figures released in the public are fudged and false. The figures which are not in favour of the government are simply fudged by the NITI Ayog. This should also be investigated by the new government and actual figures should be released so that the people of the country can be aware of the actual situation of our economy.”

Yashwant has been a vocal critic of Modi and BJP since the time he left the party last year.  Even in his book ‘India Unmade’, Sinha accused the Modi government of destabilizing the economy with the note ban. He said, “If one were to look at the context in which demonetization was done, you will recall we first came out with Jan Dhan Yojana and crores of accounts were created under the pretext of empowering the poorest of the poor by opening their bank accounts. This was in place and suddenly demonetization came. The entire currency came back largely through Jan Dhan accounts.”

Yashwant has also targeted Modi for latter’s repeated reference to Pakistan in his election speeches. He further asked why wasn’t Modi talking about China. “Modi’s 56-inch chest is only for Pakistan and it shrinks to six inches when the Chinese threat is mentioned,” said Yashwant, criticising Modi’s foreign policy.

“By invoking Pakistan all the time, PM Modi has made the mistake of hyphenating the two nations once again,” warned the former bureaucrat-turned-politician

Yashwant claimed the government would leave the country’s economy in shambles and the new dispensation would have a lot to do, including bringing out a white paper on economic conditions, demonetization, GST and others.

Criticizing the low level of language in political discourse, Yashwant said Modi was primarily responsible for this.

Related Articles:

1. Yashwant Sinha takes Modi to task, criticises government’s failed policies
2. Looking Back at De-Monetization, Two Years Later
3. RBI data reveals demonetization was a failure, 99% of banned cash recovered

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At the Kurubarahalli labour hub in Bengaluru, daily wagers start arriving around 7.30 am in search of jobs, mostly in the construction sector. Before demonetisation, most workers could find jobs 20-25 days a month. Now the search for a job, even for a couple of days a week, is a ‘nightmare’, workers told us.

Among the first to arrive at the labour hub here are daily wagers seeking employment. On any working day you can see 1,000-1,500 workers waiting to be picked up for jobs, mostly as plumbers, painters, carpenters and masons. Women search for jobs as helpers, mixing concrete or moving bricks.

Labour contractors arrive here on motorcycles or auto-rickshaws to pick up the day’s supply of workers, most of whom they know by face. The official minimum wage for a skilled worker is Rs 600 a day for men and Rs 300 for women. By noon, those who can will have found a job, and by 2 pm the labour hub will have emptied out.

Among those waiting at Kurubarahalli for cleaning and plastering jobs was Swamy, 36. He migrated to Bengaluru five years ago from Pandavapura in Mandya district, 130 km southwest of the capital city. An illiterate man, he wanted to earn enough to provide a good “convent” education for his three daughters, one of whom is physically challenged and in need of constant care.

Swamy must now be satisfied with two to three days of work a week.

“Even that is a blessing,” he said.

Swamy (second from left), an unskilled worker, migrated from Mandya district in southwestern Karnataka to Bengaluru in search of job opportunities that could help him give his three daughters an education. Swamy must now be satisfied with two to three days of work a week.

In November 2016, the Modi government decided to withdraw 86% of India’s currency, by value, knocking the bottom out of the casual jobs sector which ran on cash payments, as IndiaSpend reported in this 2017 series. Till then, Swamy and his wife, a domestic worker, were together earning about Rs 25,000 a month. Today, they struggle to collectively make between Rs 10,000-Rs 15,000 per month. The 20 days of work a month that Swamy was once assured of have dwindled to 10.

About five million men, mostly from the unorganised sector, lost their jobs over the two years following demonetisation, said an April 2019 report, the latest estimate of job losses, published by the Centre for Sustainable Employment (CSE), Azim Premji University, Bengaluru. The numbers would spiralled if women were to be included.

In 2016, urban Karnataka hosted around 300,000-400,000 workers in the construction sector, said D Rajashekhar, professor of economics at the Institute of Social and Economic Change. Bengaluru’s construction sector hosted a “conservative” 500,000 construction workers, including those from neighbouring areas like Hosur, Dharmapuri, Bidar and Gulbarga, Tumkur, Ramnagar, Kolar among others, said a 2016 study carried out by Venkataramanappa, assistant professor at Bangalore University. Metro rail construction in the city has also pulled in daily wage labourers from neighbouring states of Andhra Pradesh, Telangana and Tamil Nadu.

All these workers were hit when demonetisation was announced.

This is the seventh of an 11-part series (you can read the first part here, second here, third here, fourth here, fifth here and sixth here), reported from nationwide labour hubs–places where unskilled and semi-skilled workers gather to seek contract jobs–to track employment in India’s informal sector. This sector, which absorbs the country’s mass of illiterate, semi-educated and qualified-but-jobless people, employs 92% of India’s workforce, according to a 2016 International Labour Organization study that used government data.

By delving into the lives and hopes of informal workers, this series provides a reported perspective to ongoing national controversies over job losses after demonetisation and the rollout of the Goods and Services Tax (GST) in 2017. The number of jobs declined by a third over four years to 2018, according to a survey by the All India Manufacturers’ Organisation, which polled 34,700 of its 300,000 member-units. In 2018 alone, 11 million jobs were lost, mostly in the unorganised rural sector, according to data from the Centre for Monitoring Indian Economy (CMIE), a consultancy.

74% of Karnataka’s labour force in informal sector

The Bharatiya Janata Party, in its 2018 assembly election manifesto, promised job creation for young people in Karnataka, though it has one of the lowest unemployment rates in the country. The Congress promised the creation of 1.5 million-2 million jobs per year for the youth in its manifesto. Janata Dal (S), the other big political player in the state, promised jobs for 1 million families.

The Congress and JD(S) alliance, under a ‘Compete with China’ scheme announced in July 2018, aims to create 900,000 manufacturing jobs in four years.

The informal sector in the state employs about 74.01% of the state’s workforce, as per a 2016 report of the Karnataka government’s department of skill development, entrepreneurship and livelihood. Of these workers, only 7% had received skill training as of 2011-12. Amongst the youth (aged 16-35), only 9.4% received skill training.

Construction–along with agriculture and industries–is one of the top three employers of skilled workers in the state: Almost 7% of the total workforce is engaged in construction work, and 55.7% in agriculture.

Appanna (he uses one name), Karnataka general secretary of the All India Central Council Trade Union, estimated that Bengaluru itself currently hosts about 800,000 to 1 million construction labourers.

Government schemes in place, but not reaching targeted groups

There is no shortage of institutions and public schemes designed to teach and scale up skills among workers and protect their interests. Karnataka has about 1,507 public and private industrial training institutes (ITIs) and 289 polytechnic institutes, according to this 2013 study by the National Skill Development Corporation (NSDC). But their enrolment capacity is just at 68.9%. Rural Bengaluru has 16 ITIs and one polytechnic institute, while urban Bengaluru–that has one of Asia’s largest industrial clusters with more than 5,000 medium and small scale enterprises–has 60 polytechnics and 83 ITIs.

The state had set up a Skill Development, Entrepreneurship and Livelihood Department in May 2017. It launched the Chief Minister’s Kaushalya Karnatak Yojane (skill project) to train 500,000 youth every year, particularly school dropouts with the ability to work in MSMEs.
In September 2014, the Deen Dayal Upadhyaya Grameen Kaushalya Yojana had been launched to train 988,014 rural youth in various industrial skills; of them, 695,283 have been trained but only half–324,956–of them have been certified.

The Building and Other Construction Workers (BOCW) Act was implemented in Karnataka in 2006 for the welfare of construction labourers in the unorganised sector. Workers registered with the BOCW board are eligible for educational grants for their children, toolboxes, home building subsidies, medical assistance and insurance and pension, among others. Membership costs workers an initial deposit of Rs 25 and monthly fee of Rs 10. The exact number of labourers who have registered/benefitted from this scheme could not be ascertained.

But these measures appear to have limited reach: Less than 20% of the entire worker population receives welfare benefits and skill training, said Appanna. Swamy told us he knew nothing of these schemes. “Who can be bothered with enrolling in these schemes?” he said.

At the Kurubarahalli labour hub, most workers echoed support for the Congress, believing that the job situation would improve if the party is voted to power in the ongoing 2019 general elections. A few like daily wager Manjunath told us that they were “deeply unhappy” with demonetisation and GST but were satisfied with the manner in which the Indian government dealt with the threat to India’s security from across the border.

‘Finding a job is a nightmare’

Karnataka’s construction sector contributes around 9% of the state’s gross domestic product, as a 2013 report by the NSDC estimated, and is a big employer of youth. However, demonetisation deflated the real estate sector, impacting the construction sector as we said earlier.

In the years preceding demonetisation, most workers told us, they would get jobs quite easily. “Now it is a nightmare,” said a worker who did not wish to be named. “Demonetisation posed a serious threat to our livelihood. But the demand for skilled labour is high.”

Umesh (he gave us only one name), 52, is among the construction daily wagers whose earnings fell by 33% after demonetisation. He earns between Rs 5,000 to Rs 8,000 per month, finding work only three to four days a week. He has an “eye problem” that is yet to be diagnosed and does not allow him to handle certain construction jobs. Before demonetisation, he earned Rs 600 or more for a day’s work; this is now down to Rs 400. His wife works as a domestic helper and earns Rs 1,500-Rs 2,000 per house. Together the family earns about Rs 20,000 a month.

The impact of demonetisation, further compounded by GST, is also being felt by employers. Nizar (he gave us only one name), 46, works as a supervisor at a brick factory. His company faced a “huge drop” in sales following the implementation of GST. Even a senior employee like him has not been given a raise since 2016. Three of the eight workers under him left in search of higher wages.

Ranganath Kalappagowda, a 48-year-old mechanical engineer, owns a small construction company in Devanahalli on the outskirts of Bengaluru. In the wake of demonetisation, he did not have the cash to pay his daily wage workers–both skilled and unskilled–and he had to cut down his workforce from 20 to 14 labourers. He now pays his workers nearly half of what he did earlier–no more than Rs 10,000 a month. The amount is lower for unskilled workers.

Women workers bear the brunt

Women workers are dealing with many more problems. The employment squeeze felt after demonetisation hit women hardest. “A fall in employment is usually concentrated among women. We saw this in the aftermath of demonetisation. The entire brunt of that fall was borne by women,” said the CMIE, which estimated that of the 11 million jobs lost, women lost 8.8 million or 80%.

Nagamma, a labourer in her late 30s, stood looking hurried at Kurubarahalli. Her bright yellow saree, pink blouse and green bangles couldn’t hide the exhaustion on her face and the worry lines etched on them. She is among the millions of women workers dealing with a drastic fall in job opportunities in the informal sector.

Before demonetisation, Nagamma could find work 20 days a month; this is down to 10 now. She earns about Rs 300 a day as a helper at construction sites and manages to collect about Rs 3,000-Rs 4,000 a month. Her husband earns under Rs 10,000 a month by working around 10-12 days. The loss of earning opportunities sent him into depression and soon after he took to drinking, a habit that sucks out a large part of his earnings.

Nagamma (left) earns Rs 3,000 to Rs 4,000 a month as a helper at construction sites. Shivagangamma (right) works as a domestic help in multiple homes before looking for work as a helper.

Stories like these are common to many women at the hub. Thirty-year-old Shivagangamma’s day starts at 5 am–she works as a domestic help in multiple homes around Kamala Nagar in Kurubarahalli. These jobs earn her around Rs 4,000 a month. She wraps up these chores by 8 am and then heads for the labour hub at Kurubarahalli in search of a job as a helper–lifting bricks, filling potholes and so on. These jobs fetch her around Rs 300 a day.

Not only did demonetisation impact the family’s monthly income and savings, but it also pushed her husband, who handles plumbing and carpentry jobs, towards alcohol. She has no option but take on multiple jobs in a day to pay the rent for their one bedroom flat in Kamala Nagar, about 2 km from Kurubarahalli.

Women workers wait to be picked for work in Bengaluru’s Kurubarahalli labour hub. The employment squeeze felt after demonetisation hit women hardest.

The working conditions for daily wagers is “pathetic”, said Rajashekhar, who has studied the condition of unorganised in Karnataka. Not only do they not have access to basic facilities like drinking water or toilets, but female labourers have an added burden of facing emotional and sexual abuse as well, he said.

A woman worker we spoke to, who did not wish to be named, said she had been harassed at work but suffered in silence because she was the sole provider for her family.

This is the seventh of 11 reports. The previous stories from: Indore, Jaipur, Perumbavoor,  Ahmedabad, Kolkata and Lucknow.

(Ranganath is a Bengaluru-based freelance writer and a member of 101Reporters.com, a pan-India network of grassroots reporters.)

courtesy: India Spend

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