Demonetisation: Cashless, Jobless, Hopeless
The goalposts of demonetisation may keep shifting but one thing is clear, the fire in factories and labourers kitchens are fast dying out
Abeer Kapoor Kanpur
The smell of Kanpur greets you from a mile away, even before you enter the flat landscape of the city. It is an odd smell which inspires cognitive dissonance: putrid, rancid, and sugary, all at the same time. One’s subconscious interprets the odour as the smell of decay and mortality. All things, good or bad, must come to an end eventually. A buffalo grazing on a green pasture will end up in the slaughterhouse, skinned alive for its hide and meat. Similarly, the reliance on cash for a digital future will one day careen into the brick wall of grim reality. Kanpur is the second-largest industrial hub in North India. It is home to leather tanneries, steel works, textiles and processing centres of betel leaves for paan bahar, to name a few. These factories that populate the various suburbs of the city were the first martyrs in the reimagining of the future envisaged by Prime Minister Narendra Modi on November 8.
Demonetisation has caused tangible hurt to almost everybody who has a job or runs a business and wants to sell something; whether it be the big industrialists or the neighbourhood carpenter and tailor. It is another matter that not everyone readily admits that they have been seriously inconvenienced. The move has sucked out all the cash from a system whose life blood is liquidity. Only those with deep pockets can brave the crisis that is unfolding right before our eyes.
Panki is a flat, dusty industrial suburb on the outskirts of Kanpur. It is an industrial enclave where factories make automotive parts, hardware, cooking salt, spices, and tobacco. Since November 8, many factories have silently shut operations or cut short the number of working days to slash costs. Smaller orders, elastic demand and the inability to pay their vendors have left the balance sheets of many factories bleeding red. The net result is that their output has come to a screeching halt. Factory owners are reluctant to talk, perhaps because they believe that showing weakness in hard times is not an option. Many who agree to talk do so on the promise of anonymity and all they say is the same sad story, which starts with, “What do we say? Things are pretty bad.”
(Workers wait around till more work comes their way)
“The long-term impact of demonetisation is revealing itself in phases. The first phase is seemingly coming to an end and the imminent future looks bleak. Demand is abysmally low and due to this we have had to let go of 20 percent of our labour,” said Javed*, the owner of a steel factory. According to him the cash crunch has directly led to a sharp increase of 20-25 percent in the cost of raw material, which in turn has increased production costs, “A large number of factories in Maharashtra and Gujarat who provided us with second-grade steel have shut down; 80-90 percent of their transactions were cash-based, and two-thirds of those factories have shut down.” These steel suppliers, according to him, were the first to shut shop. The price of producing and transporting steel became too expensive, and as overhead costs increased and access to cash decreased, margins became wafer-thin and untenable. As orders began to decline and the pressure mounted, many simply packed up and went home. As the number of operational suppliers has dwindled many factories in Kanpur are feeling the heat. Due to the economies of scale of his manufacturing unit Javed has managed to remain afloat. That may change if supply bottlenecks are not removed soon.
Hardware and automotive part manufacturers are the worst hit, there is little or no demand for their goods in the market. Many have told their workers that when production picks up, they will be called back.
Ever since November 8, many factories have silently shut operations or cut short the number of working days to slash costs. Smaller orders, elastic demand and the inability to pay their vendors has left the balance sheet of many factories bleeding red. The net result is that their output has come to a screeching halt. Factory owners are reluctant to talk, perhaps because they believe that showing weakness in hard times is not an option
The large-scale job loss and the accompanying misery are quite visible. Lakhs of labourers across industries and sectors in Panki have been laid off. Many factories have laid off nearly 30 percent of their workforce, and the smaller ones are hanging on by a thread. Those workers who have managed to stay employed face other problems, “Our salaries haven’t come on time, and sometimes we have had to miss work to stand in bank queues. We are kept away from work for four or five hours. As an hourly wage labourer, how does one survive?” Those who did not have bank accounts have faced further complications. When they opened bank accounts, cheque books that would take less than two days to come have taken over a week or more to arrive, leaving many in the lurch. “I opened my bank account on December 19, and the cheque book has not come as yet. What I hear is that it is taking nearly a week for the cheque book to come,” said Rajmohan a labourer. Even though Rajmohan has money in the bank, he has no access to it.
It is estimated that 10 percent of companies shut shop in the 50 days since demonetisation and in the times to come things might be worse. “If things don’t improve or normalise demonetisation will bring further ruin to most industries,” says Javed.
Rajkumar owns his own woodwork shop, where he along with two other men make furniture: tables, chairs, stools and other household items. His shop is on the side of the highway that connects Panki to Kanpur, surrounded by five-six other such establishments. He stands at about 5’5’’, is bald and must be somewhere between 45 and 60. On being asked how demonetisation has affected his business he replies in a tone that oscillates between sorrow and anger, “In this time we find it difficult to keep our children fed, it is near impossible to put food on the table. There is no business and it is difficult to get even Rs 500 or Rs 1,000 on a daily basis. There is anger and hunger at home.” His business has taken a massive hit in the past two months, there is little or no money, and no demand that comes knocking at his door. Moreover, these small businesses rely almost entirely on cash for all aspects of their business: from the purchasing of their raw materials to selling their goods, and hiring labour. India post-demonetisation has not been kind to them, many sit idle on the side of the road with their inventory piling up. A few months ago they were productive workers earning an honest day’s bread, now they are anxious loiterers wondering where their next meal will come from.
“If a government has made a decision we have to live by it, but in the upcoming elections there will be violence, a lot of goondas are emerging and we, the honest folk, are suffering,” continues the carpenter. The steady stream of work for him and others around him has evaporated, there are no orders left. “If I didn’t have my own land where I can scrape together some dhaan from, I would have starved to death.” He says that if things don’t improve and the orders continue to decline they will register dissent with their votes.
“Our salaries haven’t come on time, and sometimes we have had to miss work to stand in bank queues. We are kept away from work for four or five hours. As an hourly wage labourer, how does one survive?” Those who did not have bank accounts have faced further complications. When they opened bank accounts, cheque books that would take less than two days to come have taken over a week or more to arrive, leaving many in the lurch. “I opened my bank account on December 19, and the cheque book has not come as yet. What I hear is that it is taking nearly a week for the money to come"
Another bugbear that has come up to haunt them is the new Rs 2,000 note. “Whoever comes says, Here, take the 2,000-rupee note, but there is no change, what do we give them? If they buy Rs 500-600 worth of goods, then providing change for that note is a headache for us,” said a wood craftsman. Asked if they had bank accounts, they chorused that they didn’t and those in their families who did hadn’t been to banks in the city. Rajkumar again talks over the other, “I haven’t seen the face of a bank in six-seven months, and now I don’t want to go to one because who will stand in line? I have no money to put in or withdraw, what will I do?”
Anger is growing in the countryside, in the villages where farms are lying dry and sallow. After two consecutive years of drought, a full monsoon this season has not brought adequate respite. The money required for bringing water up through tubewells is quite a substantial amount. Whatever money was left from the last harvest was used up for purchase of seeds and with little or nothing left, farmers are at a loss. The agri-produce market is in a shambles and crops are being sold at rock-bottom prices. Farmers have been left with no revenue which they can re-invest in the sowing season. This will adversely impact the gross produce in the sector and the continued low wages will compound the losses that will accrue from sowing of less acreage and a low harvest.
The long flue-gas stacks of leather tanneries break the monotony of the flat landscape on the Kanpur-Lucknow highway. Behind the big gates of the tanneries, some let out white plumes of mephitic smoke that spreads over the area like a thick blanket, holding the smell of formaldehyde and hides. Since November 8, one by one, many of the long chimneys have turned off their fires, and let go hundreds of labourers as work dried up.
“No tannery, from the biggest [that are part of the union] to the smallest [unorganised ones], can survive without hides. The farmers who raise these buffaloes live deep inside villages and come out to these markets, where transactions are done quickly and in cash. They don’t want to be known or found out,” says Zulfikar*, a representative of the tanneries’ union. The lives of buffalo traders has come under threat in recent times. Due to increasing scrutiny from cow vigilante groups, hundreds of traders have been targetted. Rarely do tanneries buy hides directly from these farmers as in most cases slaughterhouses are the intermediaries. According to the tannery representative, “The slaughterhouses here in Kanpur or in Delhi are having a hard time in finding these farmers as they don’t want digital payments, or even payments through cheque. In such times they prefer anonymity.”
“There are certain parts of the business where we can continue to transact through cheque or digitally. For example, in purchasing chemicals we can use any method of payment. We are ready to pay in whatever way possible but labourers don’t want payment by cheques and as a result 60 percent of our contractual labour has gone away as they see no money and no jobs. They don’t want to travel 30-40 km for work and most factories are now left with 10 to 12 percent of their permanent labour,” says a factory manager as he walks alongside the several drums that are used to process the leather. Contractual labour, according to him, doesn’t want to come to work anymore as they know that there is no money, and even if there is they will be handed large denomination notes or cheques that they will have to stand in bank queues for hours to encash. “Even labour from nearby districts and states have left, those who have taken cheques haven’t come back. If there is an influx of work, which is unlikely at this point, I don’t think I will be able to recruit enough men to finish the work,” continued the manager. Permanent employees in the factory have taken loans from family, neighbours or employers. “We had such difficulty in the past two months and now we are debt-ridden. A small amount of Rs.3,000 is difficult to return,” said Raju, a leather tannery worker.
(Inventory piles up in a factory in Pank, Kanpur)
Asif* is a large man, sitting behind an enormous table in his spacious office. The office is located inside what can be best described as one of those urban farmhouses found in affluent gated communities all over the country. In the past couple of days no visitors have come to his office, there have been no meetings and, worst of all, no orders. “We are running at a deficit of 60 percent,” he says. He is convinced that the world post-demonetisation will make the already labyrinthine process of industrial taxation more complex, but this will come later. First, according to him, the remonetisation process has to speed up because if it doesn’t all the cash-based businesses, which account for the bulk of Indian industry, will be left in a complete shambles.
One can enter Nankari, a village in Kalyanpur constituency of Kanpur, through a small opening in the boundary wall of IIT Kanpur. At the pass between the educational institute and the village, Brijesh, a local leader, is waiting. According to him, the nearby peri-urban settlement is a large one with nearly 10,000 residents and counting. Brijesh leads the way from the mazdoor basti to the vyapaari houses: the open red brick houses that spill out on the road give way to large plastered houses with gates that keep the road at bay. With the change in houses, so does the perception of demonetisation.
Brijesh points to a house, and says that in the past week 25 labourers from Kheri working in IIT have gone back. One fine day, they just packed their bags and left. “The thekedar told them that there was no money and they upped and left in the morning.” While these workers came from the outside, many workers from Nankari look for employment in Kanpur and things are not looking good for them. Kishan, who works as a construction worker in the city, is squatting near a small bonfire warming his hands. He says that he has been unemployed for close to a month now and every time he tries to collect old dues the thekedar tries to palm off old notes on him. “The poor are ruined, there is nothing left. Modi will not get my vote, not after this,” he says.
Subhash used to work as a contractual labourer in a steel factory and says the struggle to find work has got really bad, “There is only 15 percent of the work left, what will the poor do? I blame Modi, he won’t get my vote.”
“Will we stand in the bank for four days for our money? Will we wait three days for our cheques? We are people who earn enough for the day and need to eat that very day,” said a vegetable vendor standing next to Subhash.
There are others in Nankari who work in IIT in menial roles, in the mess or as guards. Habibullah is one such person who works at the IIT mess; his biggest problem is the Rs 2,000 note, “If the intention was to remove higher denomination notes from the economy, why are they printing so many Rs 2,000 notes? Change for a 2,000-rupee note is almost impossible to get.” Next to him, a woman with a child in her arms echoes the complaint. When her other child comes up and asks for some money, she says simply, “There is no money.” She then looks at Brijesh and says, “That is our story of notebandi.” There is little use for higher denomination notes in smaller towns like Nankari, it’s as good as having no money. The 2,000-rupee note might as well be an albatross around the neck of these people.
As we cross the invisible divide, the houses become bigger, with imposing gates. Ajay Gupta, who owns a fruit loading and unloading business in Kanpur, says that things have actually gotten better, “We pay less for labour now and less is more. Yes, there is a little difficulty but can’t we bear even this little?” There are others who share his blithe optimism. Rakesh Kumar has been unemployed for 15 days but according to him this is the price to be paid for a better future, “Yes, things are temporarily bad, but I am not upset or sad. It’s a matter of 15 days and things will hopefully be back to normal.” A group of young men has congregated around us. They don’t seem particularly bothered by the cash crunch, and say that they haven’t been inconvenienced in any way. As they say this, one at the back shouts, “Why do you lie, speak the truth,” then laughs and runs off.
No one really knows how life post-demonetisation will unfold. But there is consensus on one thing: if the inconvenience doesn’t get resolved soon, more people will suffer. The cash crunch and the resultant shock to the rural-urban economy are threatening to undo any gains that may have resulted from a healthy monsoon and the upcoming kharif harvest.