Demonetisation effect: As tourists stay away, note ban puts 50 million livelihoods at risk

By Mukta Patil

Anjuna (Goa): Raju Lakhani’s beachside restaurant here at this popular tourist strip in north Goa should have been packed this time of the year. But the tables at Moon Star are empty, and the restaurateur is a worried man.

“We have no customers,” he said. “Almost 90 percent of tourists are leaving because of the inconvenience caused by demonetisation.”

Lakhani said he now has no choice but to lay off workers. He is one of Goa’s many restaurant owners who are feeling the brunt of what is referred to as notebandi — the colloquial term for the ban on India’s Rs 500 and Rs 1,000 notes, 86 percent by value of all bank notes.

At 2.8 percent, the travel and tourism sector in India grew faster last year than it did worldwide (2.3 percent). It contributed to 6.3 percent of the country’s gross domestic product (GDP)–including direct, indirect and induced contributions — and translated to Rs 8.3 lakh crore in 2015, according to this 2016  report by the World Trade And Tourism Council (WTTC), a forum for the travel and tourism industry.

Tourism is also a labour-intensive sector, creating 78 jobs for every million rupees invested, according to tourism ministry  data . The agriculture sector creates 45 jobs for the same investment, and manufacturing, only 18.

Ever since 2009, the share of tourism in employment has consistently been over 10% of India’s workforce of  500 million workers. This means that the sector employs almost 50 million people–more than the population of Colombia.

Tourist woes: Cash crunch, long queues, exchange limits

In 2015, the number of foreign tourists visiting India was over 8 million, and earned the country foreign exchange earnings of almost Rs 1.35 lakh crore, a growth of 9.6 percent over 2014, according to tourism ministry  data .

But if travel entrepreneurs like Lakhani start scaling down their businesses, all this could change.

In the weeks following notebandi, it was  reported that foreign tourists were being inconvenienced. Bookings also fell rapidly in Kerala and  Karnataka .

Will King and Hallam Baker-Howard, both UK citizens in their early 20s, landed in Mumbai on 28 November 2016 — 20 days after the imposition of notebandi. They found themselves in the midst of a cash crunch.

“We went from ATM to ATM in Mumbai during our first three days in India and there were huge lines snaking outside all of them,” King recounted. “Once, after waiting for 45 minutes, we reached the front of the queue, and the cash ran out.”

Governments of several countries, including the UK, Australia, and Canada, have issued  travel advisories to their citizens about the money trouble they might encounter in India.

“It’s not just that we have to wait in line. I’m being charged a fee for every transaction of almost Rs 120 (1.5 British pounds),” said Baker-Howard. “Earlier, I would have withdrawn a large amount but now I have to do so every day and this is costing me a lot of money for no reason.”

The Reserve Bank of India (RBI) has  said that ATM charges will be waived for customers until December 30, 2016, but that does not apply to foreign bank-account holders like Baker-Howard.

The cap on withdrawal has affected not only incoming tourists, but also outgoing Indians, as Scroll  reported on 2 December 2016. Visitors were unable to withdraw more than Rs 2,000 in foreign currency, which is not adequate.

RBI  regulations also declared that foreign tourists could only exchange currency worth upto Rs 5,000 a week until December 15, 2016. However, before the move,  foreign passport holders were able to  exchange as much as $3,000 (Rs 200,000). This means that visiting foreigners can now only exchange 2.5% of what they could before notebandi.

Tourists were, however, allowed to use a “ pre-paid instrument ” in exchange for foreign currency tendered. But this does not help those who have run out of foreign currency. Tourists leaving the country post-demonetisation have been unable to change more than Rs 5,000 into their own currency, although the average demand for  re-encashment is Rs 20,400.

Travellers willing to spend, but where is the change?

Wednesdays at Anjuna are usually a crowded affair with a weekly flea market underway. The lanes are lined with stalls selling everything from clothes, handicrafts, and jewellery to spices, curios, and food. On 14 December 2016, the whole market was deserted.

Abdul Qayoom and Ahmed Bhat sit outside A-Z Handicrafts waiting for customers. They have applied for a swipe machine so they can accept card payments. However, their requests have been repeatedly turned down for lack of residence proof.

Over 35% of tourists travel to India for leisure, according to 2010 tourism ministry  data .

“People come here to spend their own money but they cannot access it,” said Qayoom. “This is ridiculous.”

Shack owners mostly set up shop during peak season and operate in cash. However, some, like the H2O bar in Calangute and Sunset Bar in Siolim, have ordered swipe machines. These are yet to arrive.

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