Havoc in the hinterland
As farmers struggle to work their fields, traders run into losses and workers go unpaid, the euphoria over PM Modi's black money purge is fading.
Prime Minister Narendra Modi's resounding November 8 proclamation on the demonetisation of high-denomination currency notes had evoked a diverse response: while the fat cats scurried, looking for ways to launder black money stashes, there was a growing sense of euphoria among India's poor. Many of them saw Modi's gambit as a masterstroke that would bring unaccounted-for money tumbling out from the safes and strongrooms of the rich.
Mohan Kumar, a domestic help in Chandigarh who returned from leave from Sitamarhi, Bihar, was thrilled that the village moneylender was the hardest-hit. "Mushkil to sabhi ko hui, magar seth ko bada thappad pada (Everyone faced difficulties but the lender was slapped hard)," he said. But the satisfaction of witnessing panic on the lender's face was shortlived, and is fast giving way to distress. Tales of despair have become commonplace across rural India.
Shahji Anandan, a 50-year-old rubber tapper on a small plantation in Kerala's Kottayam district, had smirked at others queuing outside the local bank to swap currency. "I've never had Rs 500 or 1,000 notes in my pocket," he says. But the crisis has now come his way too: there is nowhere he can tap rubber for a cash wage anymore. "The owner of the plantation where I worked doesn't have money," says Anandan.
Although intended, as Modi insists, to target the wealthy tax evaders and strike a mortal blow to the massive shadow economy that's hampering India's growth, the currency purge is showing signs of crippling the country's rural economy. The fact that it was rolled out at the start of the rabi season has only made the pain more acute. In a country where 233 million do not have bank accounts, according to a 2015 PricewaterhouseCoopers report, and depend on informal credit systems, the crisis emerging in the villages exposes the snail's pace at which rural banking has been extended. RBI figures show that from 5.3 bank branches for a population of one lakh in rural India in 2001, the number today has improved to just 7.8.
Odisha chief minister Naveen Patnaik red-flagged this in a communication to Union finance minister Arun Jaitley, pointing out that 4,400 out of 6,238 panchayats in his state have no bank branches at all. This means 16.5 million people-over a third of the state's population-have no access to banking, thus making any exchange of notes impossible for them. The sudden scarcity of cash, which is twice as acute in villages, has brought rural India's thriving informal credit system to a grinding halt. This has adversely affected every section-farmers struggling to find the means to buy seeds, fertiliser and pesticide for the rabi sowing; traders, shopkeepers and vendors on the verge of going under in the face of a contraction in consumption; and wage workers unable to find work.
Experts warn that besides making for a gloomy sentiment, the paralysis in rural India, which accounts for 80 per cent of national employment and 20 per cent of GDP, could further push the predicted slide in the overall GDP growth. Even though figures till November 25 released by the Union agriculture ministry for five major crops, including wheat, show the total area sown (327.62 lakh hectares) as marginally higher than in the same period in 2015, problems are evident elsewhere. Tamil Nadu is witnessing the steepest fall, with rice acreage falling from 9.10 lakh hectares in 2015 to 6.82 lakh hectares. West Bengal has a similar crisis with much of the kharif paddy overdue for harvest and rabi sowing delayed. The acreage under coarse cereals in Maharashtra is down by nearly 8 percentage points.
But the crisis engendered by demonetisation runs far deeper. india today's correspondents report from villages across the country.
TELANGANA
Poultry feels the pinch
It's peak season for Telangana'sRs 1 lakh crore poultry sector. Scores of poultries dotting the Telugu hinterland produce 260 million eggs and 10 million chicks a day to meet the demand. But with the farm gate price of an egg down to half of the Rs 4.42 it fetched only a few weeks ago, demonetisation has turned business upside down for G. Bhaktavatsalam, a poultry farm owner in Kavaguda, a village in the state's Rangareddy district.
The withdrawal of high-value notes and the consequent scarcity of smaller denomination currency has had a domino effect. Poultry owners are forced to make distress sales because, as Bhaktavatsalam says, "local farmers who sell us maize for use as chicken feed are refusing to supply unless paid in cash". This and the sharp decline in retail demand for poultry and eggs are forcing farmers to slash prices. A drop of over 30 per cent in sales is already impacting the inventories. The cash crunch is hitting all layers in the supply chain and poultry owners are apprehensive of the working capital drying up too.
The National Egg Coordination Committee (NECC) estimates the daily loss at over Rs 100 crore a day. "People have cut back on buying eggs and chicken in what are our most lucrative months of the year even though prices have dropped and restaurants, too, have cut down on their indent," says NECC office-bearer K.V.S. Subba Raju.
With cash grossly insufficient to pay for harvesting, fertilisers, pesticides and transportation, farmers in Telangana and Andhra Pradesh say they are staring at major losses this rabi season. This after three successive droughts and just when they were hopeful of a good harvest in areas that saw copious rainfall. For bank staff completely occupied after the demonetisation move, lending to farmers is not a priority. Sarampally Reddy, national vice-president, All India Kisan Sabha, says the mammoth exercise of replacing 86 per cent of the nation's currency notes is preventing farmers from getting timely credit.
P. Chengal Reddy, chief advisor, Consortium of Indian Farmers Associations, warns of a "chaos in the making in the countryside". Farming in India, he says, relies predominantly on traditional and informal credit systems. That a mere 35 of every Rs 100 is loaned to farmers as cash or inputs comes via banks seems to have been completely glossed over, says Reddy. That farming is region- and crop-specific, too, has been ignored, he adds.
MAHARASHTRA
Onions bring tears
A generous monsoon this year translated into a bumper onion harvest in Maharashtra, but demonetisation is spoiling the success.
Balwant Kore carted 20 quintals of onion all the way from Sakri village in Dhule district to Pimpalgaon Basmat, 70 km away, in the hope of getting a good price for his "top quality" produce. Disappointingly, the highest bid at the APMC (Agricultural Produce Marketing Committee) auction was Rs 1,000 lower than the Rs 1,800 per quintal he was hoping for. Having spent Rs 600 to grow each quintal and Rs 4,000 on transporting the onions, Kore must now make do with a paltry profit of Rs 150 a quintal.
The story echoes through the state's onion belt with many farmers also complaining that traders are paying only through cheque, and that too by postdating them by 15 days. With subsistence itself becoming a challenge, farmers are demanding they be paid a fourth of their dues in cash. "We need money for milk, fuel, medicines," says Kore.
The crisis isn't crop-specific. At Mhasawad in Nandurbar, the poorest district of Maharashtra, business at the maize and cotton market has shrunk to a tenth of the Rs 1 crore recorded daily until demonetisation struck. Traders are only purchasing cotton from poor tribal farmers for whom their meagre farms are the only source of livelihood.
Yogesh Koli, a top maize trader, reports a major slowdown in the absence of cash. "I haven't sent a single truck to Surat because I don't have money to pay for the fuel," he says, admitting that despite the scale of his operation, he is finding it difficult to pay his workers.
Chief minister Devendra Fadnavis has suggested deploying all 8,000 of the state's citizen service centres to provide additional banking support in the rural areas. Also, all banks in the state have agreed to use a single form that will facilitate transfer of requisite funds from farmers to dealers for purchase of farm inputs. Yet to take off, the measures may be belated.
WEST BENGAL
Harvest of distress
When his bank ran out of cash for the sixth consecutive day, Subhankar Mondal decided to literally take matters into his own hands. Failing to arrange even Rs 350 to hire a pair of bullocks, the farmer set out to plough his tiny, half acre holding by himself. "If I don't sow the mustard and potato now, I will have no crop, and my family will starve," he says.
Mondal hasn't harvested the ripe paddy on an adjoining half acre. Even though there's money in his account at the Bangiya Gramin Vikash Bank in Bhangar II, South 24 Parganas district, he can't access it. The bank is allowing withdrawals of only Rs 2,000 per person and it would take Mondal many visits to draw the money he needs. Mondal asks who's going to till the land if he wastes time at the bank.
In Bengal, some 7.2 million farming families-96 per cent of whom are marginal farmers-have been affected by demonetisation. State agriculture minister Purnendu Basu says he doesn't rule out the "possibility of a full-blown famine". Consider the numbers: half the paddy sown over 42 lakh hectares during the kharif season hasn't been harvested for want of cash to pay workers; rabi sowing has been completed on just 6.5 per cent of the targeted 22.8 lakh hectares; and according to Paritosh Bhattacharya, director of agriculture, this year's rabi season acreage is already 15 percentage points lower than in 2015.
KERALA
Downright disappointment
Anandan, the rubber tapper from Marangattupilly in Kottayam, suddenly finds himself out of work. P. Mohanan, a cab driver, hasn't earned in weeks and wants to know "why he (Modi) is punishing poor people like me". Manoharan Keshavan, a Dalit farmhand, doesn't have a backup plan to tide over the cash crunch. Vijayamma Rajaratinam, 59, swears she doesn't remember things being so bad. Perhaps, nowhere is the outrage as vocal as it is in Kerala.
The exclusion of rural cooperative banks and traditional credit systems from the demonetisation process is causing the real pain. K. Unnikrishnan, a retired banker who grows paddy on his five-acre farm at Pallathuruthy in Alappuzha district, says farmers with accounts in cooperative banks are in big trouble. Yet, he is among the few to support demonetisation. "Sometimes you need a hard decision to tackle a severe problem," he says. Pottakulam-based plantation owner George J. Mathew, a former MP and Congress legislator, too, supports the move. Unlike other plantation owners in Kerala and Karnataka, who have expressed fear of labour unrest among other problems, Mathew sees the banking restrictions as a "temporary" phenomenon.
PUNJAB
Sufferings in sowing time
A drive through the Punjab hinterland confirms the agriculture ministry's impressive numbers on sowing for the rabi season. The freshly ploughed fields are covered with freshly germinated shoots of wheat. The 20 kilometre drive from Bhawanigarh to Lehra Gaga in Sangrur district is particularly captivating, with wheat standing a foot tall already. But the idyllic scenery cannot hide the problems on the ground.
In Chhajli village, a farmer who introduces himself as "Bhola", explains that after the grave diammonium phosphate (DAP) and urea shortages at the beginning of the last rabi season, most farmers had purchased this year's seeds and fertiliser well in advance. He says problems could arise when more fertiliser would be required for each periodic watering of the wheat. Kanwaljit Dhindsa, who runs a school on the edge of Lehra Gaga, says it is the network of rural cooperatives that has kept farm operations going, meeting 60-65 per cent of the fertiliser needs. Thankfully, much of this is available on credit. So it's only natural for farmers here to be livid at the Centre's decision to bar cooperative banks from accepting or exchanging demonetised currency.
The Sangrur Central Cooperative Bank in Chhajli is deserted. The manager says that other than dispensing miniscule sums received from the head office in Chandigarh, everything else is at a standstill. Loan recoveries have been suspended. "Normally, in the sowing season, there is not even space to stand here," he says. Many elderly people, who have accounts only in cooperative banks, now have nowhere to deposit any old currency they might have. Old-age pensioners and widows, who opted for the neighbourhood cooperative bank for the sake of convenience, too, have nowhere to go.
In all of this, Punjabi writer and rural activist Jagdish Pabra sees a ploy to destroy the cooperative movement in Punjab. "Why else would the major chunk of the new currency notes flow to private banks," he asks.