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”

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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.

At the press conference, Sibal “played out a video clip of a sting operation in which, he claimed, a government official said BJP’s top leadership was involved,” The Hindu reported. The official was identified as one Rahul Retharekar of the Research and Analysis Wing (RAW), and one of the clips Sibal played even included a shot of what was purportedly his identity card. Retharekar claimed to an undercover reporter that officials from 26 government departments were involved in the money exchange scheme, The Hindu said, adding that Sibal, citing the conversation in the sting video, “alleged that the RAW official claimed currency notes worth thousands of crores were printed abroad and transported into India by special aircraft.”

In the video, Retharekar claims that duplicate notes worth Rs. 3 lakh crore were printed overseas and then brought in an Indian Air Force plane to Hindon air base in India, the Deccan Herald noted. However, a spokesperson for the Ministry of Defence denied this, saying, “It is categorically refuted that any Indian Air Force aircraft was tasked to fly abroad for carrying currency prior to, during or after demonetization as alleged in a video released today,” Hindustan Times reported.

Retharekar also “said the money was being used for a currency exchange operation which was being controlled from the ‘very top’ and the entire operation was monitored by a separate department headed by one Nipun Sharan in the Prime Minister’s Office,” the Deccan Herald reported, noting that Sibal “claimed Sharan reported directly to BJP President Amit Shah,” but also said that Nipun Sharan could be a pseudonym, as he was unable to verify if a Nipun Sharan worked in the PMO.

In another video clip that was played, an employee of a private bank purportedly conducted an exchange of old currency notes for new notes. “The manager of the Fort branch of IndusInd bank in Mumbai, Sanjay Shane (Channe), is seen facilitating the exchange of Rs 100 crore of old currency with new currency,” reportedly in a Maharashtra Industrial Development Corporation (MIDC) godown, NewsClick said.

Sibal said the all the videos were available on www.tnn.world, which is the website of Tricolour News Network (TNN). However, as multiple media organisations noted, he did not verify the authenticity of the videos, instead saying “that all the names mentioned in the clip were in the public domain and could be independently verified by the agencies,” NewsClick said.

Speaking to HuffPost India, Sibal noted that after December 31, 2016 (which was the final deadline for exchange currency post the demonetisation announcement), “there were huge exchanges taking place right up to 2018 of conversion of cash into 2,000 rupee notes. 500 rupee into 2,000 rupee notes.” He added, “The kind of commission that people took in the process was 16-40%. So for every transaction if you get 15-40% which is, part of it goes to the BJP, you can imagine the kind of money that these people made. Which is why it’s perhaps the biggest scam in the history of India,” telling HuffPost India that the RAW official was “just one field assistant,” and that there were “26 others; 22 men and four women. Doing the same thing all over the country.”

Sibal called it “an enterprise to earn money for the BJP from the exchange of currency,” but when asked by HuffPost if he was accusing BJP President Amit Shah of being involved, he said, “I am not accusing anybody. This is what the tape says.” Sibal highlighted the transaction at the MIDC godown, and recalled a previous instance in which he, in late March, showed a video of “this wall of 2,000 rupee notes” in Gujarat. “How could it have happened without complicity? That has to be investigated,” he told HuffPost.

Sibal stated, “If any banker or a government employee or a treasury employee can exchange such huge amounts of currency…this amounts to treason. Nothing can be more anti-national than this”. Current Law Minister Ravi Shankar Prasad responded to Sibal’s allegations, saying, “Kapil Sibal has made false allegations on our (party) president (Amit Shah) and we will take legal action,” PTI reported.

Sibal’s complete press conference can be viewed here.

The post Kabil Sibal alleges major post-demonetisation currency exchange scam appeared first on SabrangIndia.

Rahul Ingale, 32, is depressed. Sitting in his shop in Shastri Nagar of Dharavi, Mumbai, Ingale, who deals in the leather market, is facing a huge debt. Carrying forward his family business, he buys leather from Kanpur, Lucknow, Kolkata and Chennai and sells it in Dharavi to a number of processing units. “I am in debt of Rs 75 lakh now. There is no business. Complete shutdown. We can’t even pay the rent of our shop,” he says.

Earlier, Ingale had engaged eight workers in his shop. Today, there is no one. In effect, eight unskilled youths have lost their jobs, leaving Ingale and his 62-years-old father, Shivaji Ingale, to manages the business. “We were unable to pay the salaries of those boys. So, now my father and I work,” he says.

Beef Ban & Leather Goods
The ban on beef has taken a heavy toll on around 300 such shops in Dharavi. The locality was earlier a hub of leather works. But now many shops are either shut or are crawling under debt. “I am in this business for 45 years. I have never seen such a downfall in the market. It’s tyranny on people like us. We are left with nothing,” says an emotional and angry Shivaji.

Dharavi, one of the most high-density localities in the world, is also a hub of small- scale industries. As per the records of Dharavi Businessmen Welfare Association, there are 1,000 small units in the area – be it plastic recycling, leather, garments, aluminium factories and bakeries.

The leaked report of the National Sample Survey Office (NSSO) data has recorded a spike in unemployment in 2017-18. The Union government, led by the Bharatiya Janata Party (BJP), has denied the findings of NSSO data. But the reality on ground is entirely different than what the Narendra Modi claims.

The story of the Ingale family is related to beef ban. The current political dispensation at the Centre and Maharashtra banks on the ‘cultural politics’ of ‘beef’ and ‘meat’ to its vote bank. So, one can assume that the Modi Sarkar will ignore the disaster that has hit this industry. But the story of sweet products is no different.

Demonetisation Hit Bakery Units
Parvez Sheikh (37) owns Mumbai’s famous bakery, Nagina, located in Dharavi. He had other two bakeries Ibrahima (Kutti Vadi, Dharavi) and Rose (Mahim). Before demonetisation, Nagina had 40 labourers working two shifts, Ibrahima and Rose had 20 each. Sheikh’s main business entailed selling products like paav, bread and rusk in bulk. “Notebandi was such a big shock that money from street vendors stopped completely. Gradually, the business went down. I had to shut down my two bakeries and now Nagina has been given on rent to another person,” he says. Asked what happened to the workers, he adds: “I has no choice than to bid them goodbye. Many of them were from Bijnore and Barabanki in Uttar Pradesh and have returned to their native places.”

There were 25 such bakeries in Dharavi. But first demonetisation and later the Goods and Services Tax (GST) made them financially vulnerable. “I haven’t understood till date why Modiji brought GST? I know many small businesses who had to close down due to indirect effects of GST,” says Sheikh.

Plastic Industry Melts
Bakery is comparatively a smaller industry in Dharavi, compared with the much bigger plastic industry. Earlier, the area was also a hub for plastic manufacturing. But now many factories have shifted to the outskirts of Mumbai, especially to Vasai, Nalasopara and Navi Mumbai. Only plastic segregation and washing plus recycling industry is left. But that is also huge, with over 600 smaller units, each employing about four to five workers.
Juber Ahme
d is actually a graduate from Allahabad University. But in Dharavi, he does the job of segregating plastic. “I didn’t get a job in UP after completing graduation in 2013. So, I shifted here in 2015. Since then, I have been engaged in this work, as there is no job for me in Mumbai also” he says.

Ahmed says two years ago, there was demand for plastic in different forms. “Every 10 to 15 days, we used to segregate one or one and half tonnes of plastic. The broker used to pick it periodically. Now this period has widened. We don’t get plastic for two, even three months. Now the ratio of one tonne plastic segregation has slipped from 10 days to three months,” he says.

The rate for plastic varies depending on quality, from Rs 7 per kg to Rs 40 per kg. “Now, these rates have also come down. We sell plastic at even Rs 4 kg to Rs 30 kg. This has had a very serious impact on our salaries, too,” he adds.

There are around 600 small units engaged in plastic segregation and washing plus recycling in Dharavi. Hariram Tanwar (Dilliwala), General Secretary of the All Plastic Recyclers Association (APRA), says the business is down by 60-70%. “This started after notebandi (demonetisation). That time our business was shut down for almost two months. It has never recovered filly since then,” he says.

Guddu Sheikh owns a small plastic washing and recycling unit and has engaged six workers. “I haven’t reduced the number of workers. But it’s true that salaries are getting delayed. I don’t deal in ragpickers. My clients are big electric and electronics companies. They send me plastic from their factories. I crack, wash and recycle and send these to manufacturers. Now my problem is that the big companies are producing less. So, I am getting less plastic. Also manufacturers have lower demand now. We are sandwiched in the plastic business,” he says.

Textile Units Fading Away
The most affected industry, be it in jobs or turnover, is textiles. Big companies in somehow surviving the slowdown in the domestic markets but smaller units in Dharavi are not that strong.

Gafar Mansuri (42) was one of the major suppliers of suits in the Dadar, Parel markets. His factory had around 30 workers on two shifts a day. “We used to supply 450 to 550 suits per months. Now the number has reduced to just 100 or 125,” he says. Mansuri blamed the decline in business on demand slowdown. “Mandi chal rhi hai bhai. Pehle showrooms se hamare pas 400 suits to aate hi the. Ab showrooms vale hi bolte hai ke uthaav nahi hai,” (Earlier, showroom demand was about 400 suits , now they say that there is no demand) he adds.

Mansuri was forced to reduce his workforce from 30 to 10. “What do I do with so many boys? I will have to pay them, no? If my payment gets delayed by 2-3 months, how will I pay them? ” he asks. He has asked his two sons, one is in 10th and other is in 8th grade to help in the work. “Bachche padhai ke baad yaha aake chhote mote kam karenge to majdoor ka paisa bachegaa na,” (If my children help me after school, it will help me save my labour costs), explains Mansuri.

Mohammad Ejaj Khan, born and brought up in Mumbai, decided to try his luck in the garment business two and a half years ago. “I started the business with six machines. But then came demonetisation. It was not possible for me to reduce the machines. And, now I don’t have work for my labourers,” he says.

Khan deals in stitching suits, jackets and pants for children. “Earlier Rs 85 was the per coat rate. This has now gone down to Rs 77. A jacket was Rs 22, now it is Rs 17. Pant rate was Rs 40 per piece, which is down to Rs 35,” he adds. This, he says, has affected hundreds of jobs in Dharavi alone.

While films like ‘Slumdog Millionaire’ or ‘Kala’ have portrayed the immense struggle of people of living in Dharavi before world. Hardship is a synonym for Dharavi. But these hard-working people are crumbling now. That’s the gravity of financial disaster they are facing. The Modi Sarkar may contest the NSSO data on unemployment, but it can’t run away from the disaster it has brought to thousands of small units in Dharavi.

Courtesy: Newsclick.in
 

The post Dharavi Small Units on the Brink of Disaster appeared first on SabrangIndia.

बैंकर्स यूनियन ने मांगा RBI गवर्नर से इस्तीफा, मौजूदा आर्थिक संकट और मौतों के लिए उर्जित पटेल को बताया जिम्मेदार

You Have Fooled the People, Narendra Bhai, says ex-Confidante, Letter Goes Viral

Real Reason Why Modi Govt Carried out Surgical Strike on Your Pockets

The post Looking Back at De-Monetization, Two Years Later appeared first on SabrangIndia.

Highlights of Scroll.in’s coverage of the disruption caused by Narendra Modi’s decision and its effects on the common man.

An old man cries after missing his spot in a queue outside a bank in Gurgaon | HT

As India marks the first anniversary of demonetisation on November 8, it has become difficult to examine exactly what effects the abrupt withdrawal of 86% of currency has had on the economy. Partly, this is due to how nebulous the move itself was, with the government selling it as a panacea for everything from corruption to stone-pelting to idle savings. But the hurried roll-out of the Goods and Services Tax in July this year, leading to even more disruption in the economy, has made it even harder to gauge the effects of the note ban.

While we grapple with six straight quarters of slowing Gross Domestic Product growth, the debate about demonetisation has increasingly turned to whether it achieved the outcomes the government had set out. That debate, however, is incomplete if it does not take into account the pain and disruption caused by the move and whether its supposed gains, if any, were commensurate with the huge costs.

Tremendous hardship

To get a sense of how deeply the policy hurt Indians, it is worthwhile to glance back at the reportage after the note ban was announced. On the evening on November 8, Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 notes were no longer valid, and the government would introduce new Rs 500 and Rs 2,000 notes – a process that ended up taking months to complete. Anyone holding old notes had to deposit them in banks, which were soon overburdened with long hours of work, massive queues and a shortage of new notes to give out.

The result: people often found it tremendously hard to make do without cash. In Maharashtra, for example, people were unable to buy medicines or pay for treatment because the exemption allowing old notes to be used at hospitals only applied to government facilities. Adivasi villagers outside Mumbai were forced to eat just rice, with no vegetables, because their money had become useless in the market. Women who were not in the banking system were hit hard. Wage workers were either stuck without pay or given older notes, and many of them working in other states had to return home because employers were simply unable to withdraw currency notes to pay them.

Food markets froze, with commodity prices staying stable because barely any actual buying or selling took place. Small and medium enterprises in Punjab registered an 80% drop in production, and saw hordes of labourers returning home without any work or pay.
 

Compensation rumour

As they waited in line to either deposit cash or get access to the few new notes in circulation, people in Allahabad discussed rumours that Modi would find a way to deposit money into each person’s personal bank account once the massive task was complete. Indeed, across the country there were people undergoing tremendous hardship yet not complaining, labouring under the belief that the government’s efforts would end corruption and eventually offer them some sort of compensation after having collected huge amounts of black money. No such proposal to deposit money into bank accounts has yet been put forward by the government.

Bank managers were stuck dealing with long hours, angry customers, angrier employers and did almost none of the regular work – of giving out loans – that kept local economies going. Traditional forms of trade, like women of the Waghri community exchanging utensils for old clothes, had to stop because middlemen could not pay.

Chennai was hit particularly hard as failing electricity and internet services in the wake of Cyclone Vardah made the “cashless economy” seem like a mirage. Unemployment in Bundelkhand became so severe people were pushed to the brink of starvation. Rural jobs schemes in parts of the country fell apart, with no money to pay workers. Amidst all this, conmen preyed on people who believed they were eligible for additional exemptions, stealing lakhs of rupees.
 

No respite

By the end of the three-month period during which people were allowed to deposit their cash, demonetisation started to bite. Food markets saw commodity prices crash since a good monsoon had led to a bumper crop. Tomato farmers were destroying their crops on a scale never seen before, just so they could clear the fields for the next season. Every link in the supply chain of the Maharashtra textile industry was hit. Adivasis in Maharashtra were still getting only IOUs instead of cash. Even multinational corporations that did not rely on cash saw their numbers drop precipitously.

By June 2017, after the Bharatiya Janata Party had pulled off a stunning election victory in Uttar Pradesh, the economic damage caused by the note ban started to become clearer. In August, the Reserve Bank of India confirmed that nearly all demonetised notes had returned to banks dashing the government’s hope that a huge amount would go unreturned.

Out in the real world, 10 months after demonetisation, Ludhiana’s garment hub was still facing losses, with the botched roll-out of the GST adding to the disruption. In Delhi’s largest industrial area, labourers continued to have a hard time finding work. In Chennai’s flower market – where flowers were first dumped and continued to see low volumes a month later – demonetisation is credited with making people aware of a politician they wouldn’t have otherwise known to blame: Modi. And a supposedly cashless village in Maharashtra had returned to using cash, not least because of connectivity problems and a lack of cards.

Today, a year later, Union ministers are arguing that demonetisation was simultaneously a massive success and that it is too soon to say what its effects on the economy has been. Politicians and economists of all stripes are arguing about what the move did to India’s economic activity, with the general agreement being that its benefits are unclear but the costs hang heavy. A conclusion, however, cannot be made without taking a closer look at how deeply disruptive this surprise policy was to the lives of people across the country and even beyond.

Courtesy: Scroll.in

Related Article
Timeline: Ghosts of Demonetisation still hover
 

The post On demonetisation anniversary, a look back at how hard the note ban hit ordinary Indians appeared first on SabrangIndia.

After months of speculation, the cat is finally out of the bag. It is now confirmed that demonetisation achieved nothing and in fact cost India a lot. On Wednesday, 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.
 
Embed: https://twitter.com/PChidambaram_IN/status/1034708003474165760
 
Former Finance minister and member of parliament, Rajya Sabha, P. Chidambaram tweeted that, “Indian economy lost 1.5 per cent of GDP in terms of growth. That alone was a loss of Rs. 2.25 lakh crore a year. Over 100 lives were lost. 15 crore daily wage earners lost their livelihood for several weeks. Thousands of SME units were shut down. Lakhs of jobs were destroyed.”
 
Small business had to down shutters and about 90 people died between Nov 8 and Dec 8 2016, due to consequences arising out of demonetisation.
 
“While there were no benefits from demonetisation in economic terms, the costs were certain, and they were substantial. The printing costs of the new notes to replace the old ones is estimated to have cost in the range of Rs 12,000 to 16,000 crores. Add to it the costs of logistics; the cost of refurbishing and recalibrating two lakh ATMs spread all over the country; and, of course, the cost of economic activity being stopped by unavailability of cash, and the human cost actually incurred in terms of hunger and death,” a report in Sabrang India said.
 
“As this began getting exposed, Modi resorted to shifting his goalposts. He twisted the entire rationale to that of promoting digitisation, or cashless (later moderated as less-cash) economy. Surprisingly, digital payment companies like Paytm were ready to cash in on this cashless rhetoric. In the absence of cash, some people in urban areas quickly switched to digital payments,” the report added.
 
“On November 24, 2016, Manmohan Singh rightly described Modi’s demonetisation as “legalised plunder and organised loot”, and predicted that the growth rate might come down to 6% from a whopping 7.3 % in the third quarter ending September 2016. Many economists thereafter have predicted similar damage to the economy. The Centre for Monitoring Indian Economy (CMIE) has predicted that India’s GDP growth rate for the current financial year is set to slow to 6%, “on account of demonetisation”, and warned that there’s no hope of recovering from this slower pace for the next five years,” it said.
 
“Over the last two years, at least three of the government’s major claims have collapsed. It was supposed to flush out black money and end corruption. The government predicted that Rs 3 lakh crore in currency would not return to the banks. This has proved to be false, as most of the cash has returned. Either the black money was parked in other assets or is yet to be identified as such from the amounts deposited in various banks across India. Meanwhile, the country’s banks reportedly detected a 480% jump in suspicious transactions post demonetisation,” reported Scroll.
 
“Second, demonetisation was to help detect fake currency, which apparently funded terror and distorted the economy. The government claimed that at any point of time, there was Rs 400 crore in fake currency notes floating in the economy. Nine months after demonetisation, it was claimed that Rs 11.23 crore in fake currency had been detected. Now, the Reserve Bank reports a huge jump in fake Rs 2,000 notes, which were introduced after demonetisation,” it said,
 
“Third, demonetisation was to pave the way to a cashless economy and the gleaming new world of digital India. Two years later, the amount of cash with the public has reached a record high, the bank has claimed,” it added.

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Demonetisation: Modi’s Ego Trip Destroyed India’s Growth Story
Children out of school, people out of work: A year after demonetisation, Varanasi weavers still on their knees
The Drama of the Crusade Against Black Money
 

The post RBI data reveals demonetization was a failure, 99% of banned cash recovered appeared first on SabrangIndia.

In assessing the impact of the Modi government’s demonetisation measure on the black economy, the fact that nearly 99 per cent of the outlawed currency came back to the RBI has been widely taken to indicate that the measure was a failure – its costs far outweighing any benefits. The obvious reason for this is that the return of almost all the notes establishes the fact that hardly any black wealth was destroyed as its immediate direct outcome. Clearly the government had expected a different result and that is the only reason why the Reserve Bank of India (RBI) took nearly eight months to confirm to the public what it knew by the end of December 2016.  The attorney general had told the Supreme Court that the government had expected that only Rupees 10-11 lakh crores would be returned. A campaign had also gone around about the benefits that would flow to the public from the ‘gain’ to the RBI and the government of the Rs 4-5 lakh crores that would be extinguished by not being returned and converted into valid modes of payment.

Having failed to achieve the dramatic result that was expected to add to the government’s propaganda arsenal – the finance minister was seen clutching at straws after the RBI’s announcement, trying to convert the failure into a success. The claim made was that deposits of the notes had laid the foundation for future benefits as the anonymity associated with cash had been undone – more illicit incomes would be revealed, the tax base widened and greater tax revenue generated. He failed to note, however, that the return of almost all the currency in circulation also said something about the prospects of such future benefits. 

It was known even before the demonetisation announcement that only a small part of black income earned, or black wealth accumulated, up to that point, would have been held on November 8, 2016 in the form cash by their beneficiaries. For one, there was the empirical fact that there simply wasn’t enough currency around in relation to the supposed size of the black economy for it to be otherwise. The currency in circulation was about 12 per cent of one year’s national income and less than 5 per cent of the total household wealth. If the amount of black income generated annually and the amount of wealth accumulated through it were large parts of their respective totals, then clearly the proportions in the form of currency had to be relatively small. This was also not surprising but to be expected. Money is made to be spent and not held on to – even if the objective is simply to make more money rather than consuming it, or to ‘save’ for the future. For anyone not consuming immediately his or her current income but keeping it aside – currency would be the least preferable form for such addition to wealth. Currency does not earn any return and with rising prices tends to lose value.

It follows from the above that even if the beneficiaries of black or illicit incomes taken together were to lose all their existing cash holdings because of demonetisation, it would amount to a one-time loss of a small magnitude relative to their past and prospective earnings and accumulated wealth. The demonetisation measure presented such people with four choices:

The first was to suffer fully the one-time loss of losing their illegal wealth held in the form of currency. This is a choice they would have made if this loss was expected to be less than the immediate and future financial and non-financial loss/penalties they would have to bear by revealing these holdings and drawing the attention of tax authorities to themselves and their incomes. In other words, the expected costs of surrendering the “anonymity associated with cash” had to be more than the loss that would be suffered by simply destroying the outlawed 500 and 1000 rupee notes held. Clearly there were not too many people who thought this would be the case and that is why all the currency ended up being deposited!

The second choice was to reveal their cash holdings but take advantage of the amnesty scheme announced soon after demonetisation, the Pradhan Mantri Garib Kalyan Yojna (PMGKY). The advantage of this over the first option would be that the one-time loss could have been somewhat reduced, but at the same cost of revealing information on illegal income to tax authorities that would have a bearing on future earnings. We know, however, that the response to the PMGKY has been very poor with just Rs 4900 crores (or less than 0.03 per cent of the total currency deposits) being declared through it. In other words, very little of black income or wealth came to be revealed through this route.

The third and final choice was to simply deposit all the cash holdings into their own bank accounts as those without illegal incomes would, or into accounts of ‘trusted’ associates willing to do this favour and not anticipating getting into trouble themselves by doing so. This third choice would be exercised by those who expected the resultant immediate and future losses to be too little in relation to the value of cash held – that is if they were confident that the tax authorities would not be able to impose heavy penalties on them or extract significant amount of additional tax in the future based on the information that would become available to them through such deposits. Is this the choice that was favoured by most beneficiaries of illicit incomes?

If almost all the currency held by them was deposited by the public with banks, then it must be true that no one really feared that the effective total of current and future costs resulting from depositing their currency holding would be more than what was deposited. For those who had no unaccounted incomes, this would always have been true – there was no possibility of any additional tax burden or penalty arising for them from depositing of their cash holdings with banks. One part of the total deposit of Rs 15.28 lakh crores came from such people – that part was certainly not insignificant and if it accounted for most of the deposits then clearly very little of the currency deposited was ‘black’. We may not know yet the exact magnitude of the balance which originated in illicit incomes. We can be certain, however, that it must be well below 15.28 lakh crores, which is itself, as mentioned earlier, much less than the black incomes generated annually and accumulated the black wealth. Those who deposited that ‘black’ part, almost without exception it seems, revealed by their own actions that they do not anticipate paying, over several years in the future, more additional taxes than that amount. In effect, therefore, they confidently voted with their money against the finance minister’s claim that the supposed loss of their anonymity would lead to significantly greater tax revenues in the future. Doesn’t this almost unanimous opinion among the ‘experts’ at hiding incomes and evading taxes, arrived at without any explicit coordination, tell us something about what is likely to happen? If some more evidence was needed, here it is. Apparently taken in by the rhetoric of demonetisation, the finance minister had budgeted for a 25 per cent rise in income tax revenues in 2017-18 compared to the previous year. Till November 2017, eight months into the financial year, the actual increase compared to the same period of the previous year has been just over 15 per cent. Even on this count thus, the country waits for the elusive achhe din to arrive! 

Courtesy: Newsclick.in

The post The 99 Per Cent Failure! appeared first on SabrangIndia.

A  survey by citizens, carried out in January-February 2017, released recently, has revealed that only 24.3 percent of the respondents said that they were able to exchange their banned Rs 500 notes “for the same amount”, while 75 percent reported that “an old Rs 500 note was sold for Rs 400 or less in valid currency.” 

Survey

Carried out by Act Now for Harmony and Democracy (ANHAD) in alliance with 32 people’s organizations spread out in 21 Indian states, and involving 3,647 respondents, the survey, seeking to ascertain the behaviour of the people during the demonetization or noteban period, November-December 2016, further pointed out that of those who said that they received Rs 400 or less amount for Rs 500 note, 51.3 percent reported it was exchanged for Rs 400, 12 reported they exchanged it for Rs 300, and 3.3 percent reported that the Rs 500 note was exchanged for as low as Rs 200.

Among the respondents, about 25 percent of respondents were students, 13.7 percent unemployed, 18 percent employed in private sector, 10 percent working as ‘labour’, 4.9 percent reported household work as their profession, 3.4 were in government job and 4.4 percent were involved in agriculture. 

The percentage of those who reported ‘Hindu’ was 65.0 and ‘Muslims’ were about 27.0 percent – constituting together about 92 percent. There were about 3 percent of Christians and about 2 percent were Sikh. About 3 percent said that they do not follow any religion or said humanity is their religion. 
Caste-wise distribution showed that about 37 percent belonged to the general category, 29 percent were SC/ST and 30.7 percent belonged to OBC. Then, 80 percent said they had access to television, 29 percent listened to radio, 50 percent read newspapers, and so on. 

The report, which has been published in a new book, “Demonetization: Exorcising the ‘Demon’”, released to mark one year of the surprise Modi government announcement to withdraw from circulation Rs 500 and Rs 1,000 notes, said, “Region-wise distribution showed that this form of corruption was rampant in all the regions.”
 

Pointing out that the “industry to exchange old notes cropped up overnight across the country”, the report said, “The fate of the banned Rs 1,000 note was not very different”, adding, though, that here “the percentage of those who said that they exchanged their Rs 1,000 note for the same amount without any reduction was reduced to 17.4 percent.” 
 

The report said, “More than 82 percent of the respondents reported that in their locality, a Rs 1,000 note was sold for less than Rs 900”, adding, 40.7 percent respondents “reported that the note was sold for Rs 800” .
 

Then, “those who said they exchanged their note for Rs 700 were 9.2 percent, those who reported Rs 600 was the price of a Rs 1000 note were 4 percent, and 4.8 percent said that an old Rs 1,000 note was sold at as low as Rs 500.” 

The report noted, “Region-wise distribution showed that more than 90 percent respondents witnessed reduction of cost of Rs 1,000 note in Central (98%) and Northern (91.4%) regions”, adding, astonishingly, “10.4 percent of the respondents said that in their locality a Rs 1,000 note was sold for as low as Rs 100.” 

The report commented, “It is quite evident that the claim made by the Prime Minister that the objective of demonetization was to clean Indian economy of black money was hollow. Instead, a new channel for generating black money opened up.” 
 

It added, “It can be concluded that a very large amount of legitimately earned money by the poor citizens was converted into black money. With one stroke the people’s toil and labour was devalued.”

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Lalita Yogesh Patil, 31, in her shop, Tanish kirana store, in Vishwabharti Phata village, in Thane district. Since demonetisation a year ago, her store has been in losses of 50% and more, Patil said
 
It has been a year since India announced the scrapping of Rs 1,000 and Rs 500 notes–86% of India’s currency in circulation, by value, at the time. Four months and eight days ago, a new Goods and Services Tax (GST) regime was introduced. The government claimed that both policy actions were aimed at cleaning up the economy, modernising payment systems, and setting India on a path of prosperity.
 
“We used to earn Rs 10,000-12,000 a month a year ago, now it’s down to Rs 5,000-6,000. After household expenses and what is needed to send the children to school–pens, books, etc.–we are left with practically nothing,” Patil told IndiaSpend on October 30, 2017.
 
At the time of demonetisation, the Prime Minister of India, Narendra Modi of the Bhartiya Janata Party (BJP), had promised the situation would return to business-as-usual in 50 days. On days 54 and 55, IndiaSpend visited and reported from 24 corner shops in Mumbai and semi-urban, peri-urban and rural areas north of Mumbai about the impact of demonetisation on small retail stores. Patil was one of the 19 shopkeepers who had reported losses of 50% or more.
 
A year after demonetisation, IndiaSpend returned to the 24 stores to check if the situation has improved (we were able to track down and speak to 17 store owners, the others either having relocated or being unavailable at the time of our visit). Largely, they said, the situation has not improved.
 

• The owners of 14 stores said their stores were still running losses. During our last visit (in January 2017), 13 stores had reported losses.
• Among these 14, owners of 12 stores said their losses were higher than 50%, and eight said business was now worse than 10 months ago.
• All shopkeepers said GST had made goods more expensive, reduced business and customer walk-ins, but their estimates for business lost ranged between 10% and 50%.
• None of the store owners said business was better than before November 8, 2016.
• All shopkeepers said fewer customers wanted to pay through cashless modes, so fewer shopkeepers have invested in non-cash payment infrastructure such as card swipe machines.
• Support for the BJP among kirana store owners remains strong, despite their losses.
• Nearly every shopkeeper we spoke to (15 of 17), including supporters of the BJP, said they could not see any benefit from demonetisation.

Source: IndiaSpend interviews
 
Jobs vanish, as does business
 
In Vishwabharti Phata, off Kawad highway in Thane district, Patil runs the tiny Tanish Kirana Store, which is attached to her pakka house flanked by rice fields, a few hundred metres from the village centre. We visited at noon. Her sons, Harshad (11) and Tanish (6), were playing a game of marbles on the porch. Inside the store, half-empty jars lay scattered across empty shelves.
 
Patil’s husband’s death in a motorbike accident in 2012 had forced her to close down the store. She reopened it two years ago, after having tried her hand at working in a chocolate factory. “I was earning Rs 6,000 a month, but was spending Rs 50 a day to travel to and fro. It made no sense,” she said.
 
The shop had just begun to do well again when demonetisation hit and Patil’s income dwindled. Four months later, in March 2017, she was diagnosed with a spinal condition, and was forced to borrow Rs 20,000 from her brother for treatment. “I haven’t been able to pay him back yet,” she told IndiaSpend, adding that she has to incur further treatment-related expenses every two weeks.
 

Lalita Patil and her sons Harshad and Tanish outside their home and the attached shop. Patil had reopened the store two years ago after her husband passed away in 2012. Her family of three is entirely dependent on the shop’s earnings.
 
Patil’s shop would have enabled her to afford treatment were it not for demonetisation, she said. Her most regular patrons were local adivasis (tribals) employed by small businesses in the area. Hit by demonetisation, these businesses downed shutters and laid off workers, so Patil’s regular business disappeared. Since November 9, 2016, she has suffered 65% losses, Patil estimated.
 
Losses pile up
 
In conversations with IndiaSpend, 14 of the 17 store owners we revisited said they were facing losses, one more than in January 2017. Among these, 12 said their losses amounted to 50% or more, and eight said their businesses were now doing worse than 10 months ago.
 

Source: IndiaSpend interviews
 
Three of the store owners who now admit losses had told IndiaSpend during our previous visit in January 2017 that their businesses had not been affected by demonetisation.
 
None of the 17 revisited stores said earnings were now better than before November 8, 2016.
 
Four kirana store owners said business had improved slightly by June 2016 but the gains had been quickly lost with the introduction of GST on July 1, 2017.
 
“Business was improving before GST came in. Now any chances of profit have been completely ruined,” said Jagdish Chaudhari, a 23-year-old kirana store owner in Kupari Naka, Virar, a rural fringe of the Mumbai Metropolitan Region. In January 2017, Chaudhari’s brother Chaganlal, an avid BJP supporter, had said business had not been greatly affected by demonetisation.
 
Now, the family told IndiaSpend, the shop’s losses amount to 50%. “Earlier, if the maximum retail price was Rs 10, companies would sell to us at a discounted rate of Rs 8 so we could earn Rs 2 in profit. Now with GST we sell at the same rate we buy. There are no savings, no profits–only losses,” Chaudhari said.
 

Jagdish Chaudhari of Poornima Kirana stores in Kupari Naka, Virar, said that since the introduction of GST in July, his shop’s profit margin had dropped and the inflow of customers had reduced by half with many buying goods in lesser quantities.
 
“Iss saal Diwali kuch khaas nahin tha [this year Diwali was nothing special],” said Ramesh Kumar, 34, another shopkeeper in Kupari Naka who reports 50% losses. “I have yet to sell 80% of the store’s festive season stock of rawa, sugar, etc. We could not even buy new clothes for ourselves or burst crackers at home. We hardly made sweets.”
 

All the kirana stores we revisited said GST had made consumer goods more expensive, leading to a drop in earnings of between 10% and 50%. The waning trickle of customers for an entire year has visibly dampened spirits–14 of the 17 store owners said they did not hope things would get better.
 
“Kabhi kabhi lagta hai ki dukaan band karke kheti mein hi kaam karna chahiye [sometimes I think it is better to shut the store and work on the farm],” said kirana store owner Megha Patil, 29, of Hivali village. What prevents her is the fact that farming is risky too–heavy rains in October this year washed away the bhindi (ladyfinger) crop on her land, causing losses of Rs 10,000-15,000.
 
Patil mortgaged her gold to meet farm expenses, hoping to pay off the loan from the shop’s earnings. “Now we are struggling to even pay the interest of Rs 1,200,” she said, sitting in her 100-sq-ft home, a bamboo hut patched with mud, attached with which is her 50-sq-ft kirana store.
 

Farmer and kirana-owner Megha Patil mortgages her gold every year to meet farm expenses. With heavy rains ruining the crop, and the shop in losses from demonetisation and GST, she says it is now difficult to pay the interest.
 
“Who wants to get their hopes high? Anytime the government can decide anything it wants–we are left with no choice but to just deal with it,” said Narayan Chaudhari, a shopkeeper in the Ghodbunder area of Thane, who reported over 50% losses. “Only big businesses can survive in this climate,” he said, a common refrain across stores in the urbanised parts of Palghar, Thane and Mumbai districts.
 
“Big supermarkets like D-Mart buy in such large quantities that companies can sell to them at even bigger discounts. So even if they offer goods to customers at amazing discounts they are still earning a profit. Obviously people will flock to them–how do we compete?” said 18-year-old Ashish Dharaviya, whose family-run kirana store in Borivali reported 50% losses over the last year.
 
Still, two of the 17 stores we revisited said they were hopeful business would improve, in six months to a year from now. “Even if prices rise, these are basic goods. People will have to buy to survive,” said Raksha Patel, 19, who said the situation in her shop was back to normal, and was unaffected by GST. “Everything is as it was before. Nothing better, nothing worse.”
 
After initial surge, digital payments report a slump
 
In the days after demonetisation, the government’s demonetisation narrative changed from an attack on “black money” and “fake currency” to the promise of a “cashless/digital” economy, as IndiaSpend reported on December 5, 2016.
 
During our visit to kirana stores, we found that 12 of the 17 stores’ owners did not have a mobile wallet to offer customers a digital payment option. In January 2017, four of these 17 shopkeepers had owned digital wallets, and the number had gone up to five in 10 months. It was mainly shop owners in urbanised areas who chose to maintain this option.
 
Only two of the 17, located in the densely populated areas of Vasai and Mumbai, used point of sale (PoS) machines, down from five in January 2017. Three shopkeepers had cancelled their request for PoS machines.
 
Source: IndiaSpend interviews
 
“Running this shop on cash is itself so expensive now. Who’s going to bother keeping other options,” said Kumar of Kupari Naka.
 
All shopkeepers using PoS machines and mobile wallets said customers prefer to pay by cash.
 
In January 2017, more than half of the interviewed store owners (14 of 24) had said their stores were too small and sales too little in value to warrant cashless modes of payment. They had also said that like themselves, their customers were not educated or wealthy enough for such options, as IndiaSpend had reported.
 
With the value of cash in circulation now restored to nearly 92%, about half, or eight of 17 kirana owners, now reported choosing cash because customers prefer it anyway, while the rest said these technologies were beyond their customers’ literacy levels.
 
While digital payments have not seen an uptake, eight store owners, all located in urban areas, said they now accept and receive cheques as an alternative method of payment. In January 2017, only one shopkeeper had reported accepting or receiving cheques.
 
“We get cheque payments but this too has reduced as compared to some months ago since cash flow is back to normal,” said Mahendra Chheda, a shopkeeper in Dahisar, Mumbai’s northernmost suburb, adding that he receives five to six cheques a month as payment from customers.
 
Notably, all shopkeepers now reported being aware of cashless technologies, compared with 35% who were not previously.
 
Despite this increased awareness, 16 of 17 kirana store owners did not report using banking services more than they earlier did. In fact, more than half the shopkeepers we met, in rural and semi-urban areas, reported using these services even more rarely as earnings have plummeted, hitting savings and investments.
 
“We are hardly making money to bother going to the bank. Whatever we earn goes to the house or back to the shop,” said Nilesh Patil, a shopkeeper based in Kawad in Thane district, who said his shop is facing losses of 50%. “The bank itself would reject our tiny deposits.”
 

Nilesh Patil (right) runs Sadguru Krupa Stores in Kawad, currently in losses of over 50%. His joint family of nine members depend entirely on the shop’s income.
 
Yet, continuing support for Modi
 
Off the Bhiwandi-Wada highway, kirana store owner Ambika Kumbhar said savings and investments aside, losses and inflation have hit her home budget. “Earlier we could make more food for the house because we could afford more. Now we make lesser. This is how we cope,” she said. While her store has now recovered some of the 75% losses it suffered in January 2017, it still suffers a 25% loss. The shop, which stays shut during the monsoon season, is the primary source of income for the family of potters, traditionally set on the lowest rung of the Maharashtrian Hindu caste order. They also sell a pot or two a month for Rs 50 to Rs 100, she said.
 
“A couple of months ago, I found Rs 10,000 in old notes kept in an old book. I had saved it from years ago and had completely forgotten about it. By then the banks had stopped exchanging currency so they became useless pieces of paper,” said Kumbhar, her hands shaking, her voice terse. “It felt like 500 pots crashing.”
 

Ambika Kumbhar runs Shree Swami Samarth kirana store which has recovered 50% of the losses reported in January 2017. After this, the store is now running at 25% loss.
 
Kumbhar said it would take years to recover the losses her family had suffered. Yet, her allegiance to the BJP and to PM Modi remains intact. “We support Modi because we are from Gujarat, he is of our community. Our village supports the BJP, so we do too,” Kumbhar said, adding, “I have been so angry, but what can we do? We just have to let it go. The effect is not as much on us as it would be on richer people.”
 
Ten of the 17 store owners we revisited continued to support the BJP and the Prime Minister. This is one fewer than in January.
 
Source: IndiaSpend interviews
 
Among those who still support the BJP, six, including Kumbhar, cited village or community ties as their reason. Two said they had no choice since the opposition still does not offer a strong leader to replace Modi.
 
However, in rural areas, fewer shopkeepers now support the BJP. “How can we support them after what they have done to us in the last one year? Modi made the rich richer, the poor poorer,” said Patil, the store owner from Hivali. She had previously supported demonetisation and the Prime Minister.
 
“People are angry. First notebandi, then GST, now losses on the farm have ruined us. We are not as enthusiastic as before. The Shiv Sena has also been capitalising on this, rallying villagers against the BJP,” said Vasant Bohir, 55, another kirana store owner and resident of the village.
 
Across the board, BJP supporters included, 90% of the store owners we revisited (15 of 17) said they failed to see the point of demonetisation, and that it had been of no use to them.
 
“Where have we got back any black money? Those who had to get away, got away,” said Kamlakar Patil, a kirana owner in Dugad village, off the Wada highway, who said his store had faced 50% losses.Yet, he supported the BJP: “Their intentions are good, just the implementation is bad.”  
 
Ten months ago, eight of these 17 shopkeepers, including Kamlakar Patil, had supported the government’s demonetisation decision. At that time, Patil had said he hoped demonetisation would weed out the black money circulating among the rich, and bring justice to the poor.
 
“It may have been good for the government, but what good came of it for us? Nothing has changed except for our losses,” said shopkeeper Lalita Patil, a BJP supporter, back at Vishwabharti Phata.
 
“Chalo, hume kuchh naya to dekhne mila [Well, at least we got to see something new],” said Kishan Chaudhary of Virar, also a BJP supporter, who reported losses of 40%.
 
(Saldanha is an assistant editor at IndiaSpend.)
 
Field Notes:
 

1. On October 30 and 31, 2017, IndiaSpend went out to retrace each of the 24 stores featured in its January 16, 2017, report on the impact of demonetisation on small retail stores. We were able to interview 17 store owners. Among the remaining seven, four stores had relocated to other parts of the Mumbai Metropolitan Region, closer to urban Mumbai and Thane, while the owners of three stores were absent when IndiaSpend visited.
2. The seven kirana stores not included in our anniversary study of the impact of demonetisation on small retail stores are spread across rural, semi-urban and urban areas. They had previously reported losses ranging between 25% and 60%. Three store owners had said they supported the BJP, two that they did not vote, and one that he was undecided.

Courtesy: India Spend

The post A Year After Demonetisation: Small Retailers Report Further Losses But Support BJP appeared first on SabrangIndia.

On that day, Prime Minister Narendra Modi announced that from midnight onwards, notes of Rs 500 and Rs 1,000 would be withdrawn from circulation. But the decision – which was taken on a pretext to curb the black money hidden outside the banks – did little to end the menace of black money, but did sound the death knell for the weavers of Varanasi.

Varanasi is the centre of weaving industry and known across the world for the finest Benarasi sarees. But the beauty of the saree compares in stark contrast to the condition of the weavers, a number of whom have started moving on to other jobs. Their children, once in school, are also now turning to weaving to ensure that the industry remains afloat.

Take the example of Wakeel Akhtar, a 50-year-old weaver who had grown his business of weaving enough to progress to power looms from handlooms. But for the past one year, only one of his eight power looms are running. The rest remain idle and gather dust.
All thanks to demonetisation, which was followed by GST.

Akhtar said, “During demonetisation, we started taking loans from several people. And that loan kept us running for several weeks. Otherwise, we were spending too much of our time standing in bank queues, rather than working on our looms.”

Soon after demonetisation, Varanasi’s weavers lost their daily earning. As a sector which survives on daily payment basis, the weaving community of Banaras was able to reach some sort of settlement only four months after the currency ban.

“For the bigger businessmen and firms, we were the tools to return the old currency in the banks,” said Akhtar, referring to the fact that small-scale workers, craftsmen and weavers were getting paid in older currencies, and they had to stand outside banks to exchange them.

But there are much bigger problems before the weavers, like the kids who have left schools and started learning to weave. 42-year-old Mohammad Azam is the father of three children. All were studying in the school until April 2017. After the academic session concluded, Azam was unable to register them again for the next session.

Azam explains the situation, “There are two kinds of weavers. The first is the loom owners. We have to take care of everything, from threads to the looms. And second are contractual weavers, who come here and work without any sort of responsibility for things, and they have to get paid a definite amount every day, irrespective of the conditions.”

“Both sections have taken a hit, but the second category has moved to other jobs. We, the loom owners, have no such option,” said Azam. “So I did not have any money to let my kids continue the studies. Now all have indulged in weaving because there is no any way out of this,” he added.

Sabir Ali, 30, was only a weaver before, but now he deals in other kinds of stuff related to weaving, like making threads. For him too, this was the only option. Ali said, “Luckily, I still weave, but fewer than before. But many of my friends went to Surat or Mumbai, in order to earn better in other jobs, as weaving is a dying business in Varanasi.”

Ali said, “Soon after problems of demonetisation ended, it was the cashless India thing which took a toll. Businessmen started to pay us in the cheques – as the government introduced a rule of not paying more than Rs 10,000 in cash.”

“We were people who lived on the daily wages. We used to spend our every day’s earning into the food and clothes. Now with the cheques, we have to wait three days for the amount to appear in our bank accounts, “said Ali. “So to feed, we have to have something else, so I am also selling low-quality threads to weavers.”

Sabir Ali took us into a house of his friend. There were four people sitting in the loom and finishing Banarasi Saree and cotton Saree jobs that came to them after four weeks of idleness. Aslam Ansari said from behind of one of the loom, “And we will get our payment more than a week after we submit our work.”
But the more surprising scene was in the adjacent room, to show which Sabir Ali took us into the particular house. There were two boys named Mohammad Alam (13) and Shamim Akhtar (14) who were weaving together on a loom. Shamim Akhtar still goes to school, while Alam quit recently. They both were learning to weave. Sabir Ali said, “They are not studying not because they are poor, but because their father cannot earn much on his own.” The kids nodded to this claim.

It is not a new thing to see kids learning the weaving process, but seeing them leaving studies because of weaving is indeed new.

The weavers, who were slowly recovering from the demonetisation disaster, were hit again in 2017 when the government introduced GST as “one nation, one tax”.

Rajeev Kumar Modi, a 45-year-old thread dealer in Varanasi, is also suffering the pain of demonetisation and GST. Modi said, “Soon government banned the currency, my warehouse left filled with the raw materials and threads for several months. No weaver was able to buy from us, so we were not able to bring more.”

“Soon the conditions normalised over a period of time, but after GST, weavers do not come here often,” said Modi.

He also said, “Previously we used to sell 20 or 30 kilograms of threads every day, now this has become our weekly count.”

Cotton and silk threads fell under 5 percent slab, while the artificial silk threads – which constitutes the major part of the business in Varanasi’s weaving community – fell under the 18% GST slab. Earlier, the Central Board of Excise and Customs refused to consider saree as readymade or made-up. And even if it was considered made-up, a mere 2% tax was levied on Sarees. But after GST, the prices of the final product as a saree went up by around 20%, but weavers’ wages were cut down.

“A businessman has to sell a saree to various customers with a profitable margin, so he cut down our wages. If we were getting thousand rupees for completing a saree before GST, now we are getting only Rs 700-800 for the same piece,” tells Shamim Ansari, a 32-year-old weaver from the city. “Our wages fell down because the profit margins had to be maintained,” he added.

In addition to the GST on threads, GST of 5 percent was also introduced on the Sarees, which faced heat from the various confederation of Saree dealers. And seemingly, government’s apathy towards the protest has hit the PM’s own constituency most.

One can argue that the issues of weavers have come to the notice of the government and that they are working to address these issues. Prime Minister Narendra Modi inaugurated a Trade Facilitation and Craft Museum Centre in Varanasi in September this year. The goal to establish the centre was to promote the work of weavers and artisans of the city. However, ​many weavers have not even heard of the centre, and those who know little about it say – if Mohammad Saqib to be quoted – that the centre is a museum and showcase of weavers’ work. “One should see the conditions from the ground that we are not able to build up any kind of product in our traditional workshops and looms,” added Saqib.

Moreover, the central government erected a Weaver’s colony and training centre in a Karsara village nearby of Varanasi in 1993-94. But the training centre lies unused because of its distance from the city’s centre which is more than 15 kilometres. So, while the government seems to have taken steps, their effect is limited and does little to assuage the pain of the weavers. And this is visible in areas around Bajardiha or Peelikothi – the two major centres of weavers in Varanasi – many weaving houses can be seen locked, even in peak times. Mohammad Jamaal, a 77-year-old resident of the community said, “This was the season of weaving. No one could sleep due to high demands ahead of wedding season. You could see weavers working at least 16 hours a day. Now you can see most people shutting their shops.”

Courtesy: Two Circles

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