Babita (second from right) has been looking for a job as a tailor for eight months now since the last unit she was employed at shut down post-demonetisation. Every morning, thousands of migrant workers land up at the Noida Hosiery Complex in search of casual jobs.
 
“Look, my chappals have worn thin,” said Singh, 30, pointing to her feet. Giving up is not an option. There is nothing left for her or her family of four in Bulandshahr, their hometown in western UP that they left seven years ago in search of a better life.
 
In March this year, the small garment unit where Singh worked for six years shut down in the wake of demonetisation, the scrapping of 86% of India’s currency, by value, on November 8, 2016. There were thousands like her, pleading for jobs at the gates of around 300 factories in the complex or sitting around in groups, hoping for a job tip from passers-by.
 

The ‘Wanted’ boards outside factories listing vacancies have been increasingly sparse since demonetisation
 
Aimed at making the economy less cash-reliant, demonetisation came as a body blow to the readymade garments sector, 80% of which made up of informal units that operated with cash and casual labour, as IndiaSpend reported in December 2016.
 
About 1.5 million jobs were lost during January-April 2017 in the immediate aftermath of demonetisation, according to this analysis by the Centre for Monitoring Indian Economy, a business information company. There have been 35% to 55% job losses in manufacturing and trade since November 2016, according to data collected by the All India Manufacturers’ Organisation (AIMO) as the Indian Express reported on November 8, 2017.
 
There are no clear figures on how many workers have lost their jobs due to the crisis in the unorganised apparel sector. But informal jobs, with little or no social security or benefits, constitute around 92% of all employment in India, as per government data. And the textile industry is the second largest non-farm employer in India.
 
Singh–and thousands of other semi-literate, mostly unskilled workers employed as tailors, packers, helpers and cutters–have been hit hardest by demonetisation. They usually earn around Rs 350 for a day’s work.
 
“I was offered a job with an eight-hour schedule this morning for Rs 6,000 a month,” said Yadesh Kumar, a migrant worker from Etawah in western UP. “I have a family of five, how will I cope?”
 

Many workers, like Yadesh Kumar (in yellow), had opened bank accounts to facilitate cheque payments but now find that there are no jobs to give these accounts any meaning.
 
Many workers opened bank accounts after demonetisation to allow employers to make cashless payments. But with no jobs for the few thousand workers–100,000, the local reckoned–wandering the hosiery complex, there is no money to put in these accounts.
 
Just when it seemed that cashless systems were falling into place by the middle of 2017, the complex Goods and Services Tax (GST) arrived as a second big blow. The tax system demands that companies in a supply chain are linked to one another, but it is too complex for this largely unorganised sector.
 
“Dhandha uth hi nahin paya (the business couldn’t get back on its feet),” said a manager at a export house in Noida. The distress visible on the streets of the factory complex was evident in the wake of demonetisation, when 40% of workers reportedly lost their jobs, but now hopes of recovery are receding.
 
“Business is down by 40% in the Noida-Greater Noida region. My calculation is that about 50-70 units have shut down here in recent months,” said Lalit Thukral, executive member of the Apparel Export Promotion Council and head of the Noida Apparel Export Cluster. “Around 8,000 small garment businesses of the total of 10,000 in the country are gasping for breath now.”
 
This is happening not just in Noida. In Tirupur, the hosiery hub in western Tamil Nadu, too businesses are down by over 40%, the Business Standard reported on November 3, 2017. Surat, the textile centre in Gujarat, is in turmoil. And in Gurugram, at the eastern end of the National Capital Region from Noida, former garment units on prime real estate are being let out.
 
Triple whammy: Competition from Asian rivals, demonetisation and GST
 
Last year when demonetisation hit the apparel sector, it was already stressed by competition from other Asian nations, such as Bangladesh, Vietnam, Cambodia, Sri Lanka and Myanmar. The contribution of apparels to exports of especially Bangladesh and Vietnam rose 6.1% and 9.6% respectively in 2015, the Economist Intelligence Unit, a think tank, reported on February 3, 2016. Bangladesh, now only second to China among apparel exporters, is giving Indian businesses a particularly rough time.
 

Nearly 80% of businesses in the apparel sector consist of small scale units that employ casual labour.
 
“We are simply not productive or organised enough to deal with this competition. And then we bring in something like demonetisation and Canadian model of GST into the industry,” said a mid-scale vendor for top western brands. Speaking on condition of anonymity, he said he shut down one of his two factories with 100 machines and 150 workers last year and is now downsizing further.
 
In the long term, he pointed out, cashless payments and GST could bring good things to the industry–formalisation of a largely unorganised sector, more transparency, less inspector raj and the corruption that goes with it. “But in the immediate future it is going to wipe out an entire generation of businesses,” he said.
 
‘No jobs for men or women, illiterate or educated’
 
The apparel sector, as we said, provides work for men and women with low of no skills from primarily rural areas in Uttar Pradesh and Bihar, where their last occupation was either agricultural labour and small-scale farming.
 
Some said they had not held down jobs for a year now.
 

Workers like Enashi Devi are being turned away at gates by factory managers who cite GST as the reason for the downturn.
 
“Woh bole rahein hain DST (sic) hai, naukri nahin milegi (they say there are no jobs because of DST–meaning GST). Look at the mobs of people searching for jobs, it makes me dizzy. Whether you are a man or a woman, educated or illiterate like me, there is no hope for any of us. Bura haal hai (things are bad),” said Enashi Devi, who had been doing the rounds of Noida the first day of every week in the hope of landing a job as a helper.
 
Feeder businesses struggle to cope
 
Equally impacted are the jobbers who run the micro businesses feeding the industry. These are complex chains of small but critical enterprises such as dyeing, embroidery, printing and zip-making, all finding it hard to comply with the GST. With earnings between Rs 30,000 and Rs 50,000 a month, they are struggling to make sense of it all.
 
Nayagaon, a shanty that is part village and part city, off the Hosiery Complex, houses Durga Dyers. This two-man operation runs out of a room next to a buffalo stable. Its owner, Anil Bansal, is a “local” dyer–someone who can dye small bits of fabric or yarn, the kind of assignment no big business in dyeing will take on.
 

Small feeder businesses like this dyeing unit running out a one room tenement in Nayagaon, off Noida Hosiery Complex, are finding it hard to deal with the complexities of GST.
 
He earns around Rs 50,000 in the peak season and has just acquired a GST account. But he cannot handle its complexities since he is not computer literate, so he now hires the services of an accountant. “It is tough but we are managing somehow,” he said.
 
Not many can afford an accountant’s fees–anywhere between Rs 5,000-Rs 10,000 on average–on such profit margins as small as Rs 15,000-20,000. They opt instead for cash payments to work around GST. “Capital is getting blocked like this because it is hard to claim returns when the entire supply chain is not GST compliant,” said Thukral.
 
To add to the crisis, the sector is furious with the government decision to slash the duty drawback on exportable garments from 7.5% to 2% from October 1, 2017. This drawback is a relief given to businesses by way of refund of custom and excise duties on inputs used in manufacture of exported goods and it allowed the garment industry to stay competitive.
 
Thukral predicted the closure of another 20% units in Noida if the industry does not rally around to take orders for the next season.
 
“Iske baad toh bas ek hi kaam rah gaya hai–haath mein katori leke bheek mangna (there is only one alternative left after this, to beg),” said Singh, the job seeker we met at the start of this story, as she gave up her search for the day.
 
(Nair is a consulting editor with IndiaSpend.)
 

The post Demonetisation, A Year On: In Delhi Textile Hub, Businesses Unravel, Jobs Scarce appeared first on SabrangIndia.

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

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