 "Indian Rupee")
We write this exactly a month after the demonetisation of high-denomination currency notes. Over the past month, reams of news print and hours of television broadcast time have focussed on evaluating its economic merits and demerits. There has been much discussion on whether the idea itself is good or if its implementation is flawed, but inadequate attention has been given to understanding its impact on rural life. It is a gross mistake to evaluate the success of any financial intervention in rural areas by looking at it through the lens of the urban middle/upper middle-class banking experience.
Although the quantum of Rs 500 and Rs 1,000 rupee notes in rural areas appears lower than in urban areas, the scale becomes high because social security pensions/NREGA wages are paid in higher denomination notes. In Chhattisgarh, for example, the wages for a week of NREGA work are Rs 1,002. For a vast majority of the rural poor, access to banks is a major impediment. Banks, on average, are several kilometres away from villages, and very often, one bank caters to multiple villages. The cumulative expenditure on visiting a bank and spending long hours in a queue amounts to about Rs 50 per day, which is roughly a third of daily income for the rural poor. This additionally implies the loss of at least a day’s wages.
And, there is no assurance that they will be able to exchange their old currency notes in a single visit to the bank. Thus, at a conservative estimate, the “loss” of an average daily wage labourer is about Rs 200 per day. It does not help that banks in rural India are extremely short-staffed, prompting bank officials to treat customers in a rude and unfriendly manner. This is nothing new to the rural populace, but is being exacerbated through the demonetisation drive. Several local “agencies” have reportedly also charged a commission to convert old currencies from the banks.
Second, access to relevant information about the processes involved in changing currency notes has been a hindrance. Section 4(1) (c) and 4(1)(d) of the Right to Information (RTI) Act stipulates that the government should publish all relevant facts while formulating important policies and provide reasons for its administrative or quasi-judicial decisions to the affected persons. However, efforts to disseminate information about the RBI guidelines in rural India have been poor. Further, unable to keep track of constantly changing guidelines, rural bank officials are using their powers to subvert information. Rural banks and post offices have been allocated less funds than their urban counterparts. Even when RBI guidelines mentioned a withdrawal limit of Rs 10,000, rural banks in many areas were disbursing only Rs 2,000. There are several cases where it was made mandatory for the unorganised labour force to accept the old Rs 500 or Rs 1,000 notes. It became a precondition to get daily work and wages.
Third, the exercise of changing old notes has adversely affected other banking responsibilities. All the focus and attention is on exchanging old currency notes. Small and marginal farmers who borrow from banks are suffering, as all other banking operations have come to a standstill. This could alienate them forever from agriculture, with loan renewals stopping completely and with no cash flow outside. Government guidelines specify that people who don’t have bank accounts and want to deposit large amounts of cash can open new bank accounts. But, this is near impossible owing to the pressure that rural bank officials are facing.
Four, delays in wage payments for NREGA through post offices are ubiquitous across the country. Payment delays are now greater, as branch post masters in villages need to wait for currency exchange. This, on the NREGA books would be recorded as paid, but from the perspective of the labourer, the delays could be completely unaccounted for. Consequently, there won’t even be any calculation of delayed compensation of wages, let alone paying the delay compensation. This is in gross violation of the NREGA.
Fifth, migrant labourers are away from their natural habitat and are among the most vulnerable. In migrant labour, we include both rural-rural migration and rural-urban migration. The migrant labour force treats its ration cards, Aadhaar cards and other identification cards with utmost care and seldom carries them to their new work place for fear of losing them. The RBI guidelines make it impossible to exchange money without valid identification proof. Although theoretically there is a provision to give another person an authorisation letter for deposits and withdrawals, banks aren’t necessarily honouring this commitment. This has rendered migrant labourers even more vulnerable.
Many married women in rural households save money in “dabbas” for emergency purposes, without telling their husbands. This, on many occasions, comprised Rs 500 notes. There are reports that the demonetisation exercise has resulted in marital discord because the husbands have “discovered” that their wives save money without their knowledge. Further, some other informal economic initiatives that are operational in rural areas can be jeopardised. For example, in rural areas of Andhra Pradesh, women save money from domestic expenses, pool them on a monthly basis and buy pulses for their daughters and other children who are in need of nourishment. The cash crunch will potentially affect such activities.
There are cases where families have borrowed money from friends and relatives for weddings. Wedding cards are not always printed in rural areas, so the priorities offered in cities for weddings are not applicable in rural areas. Money thus borrowed amounts to a few thousands, with no recourse to easy exchange. Consequently, wedding arrangements have been affected.
Cash is practically the only transaction mode in rural India. The government has changed the narrative from a drive to flush out black money to that of creating a cashless economy to suit its convenience. A cashless economy, at present, is a pipe dream in rural India. There should have been some care, caution, and conscience before such a drive was imposed in areas that house the bulk of our population.
Chakradhar Buddha is an activist and researcher based in Andhra Pradesh, who works in the areas of NREGA, tribal rights, RTI, youth empowerment and education.
Rajendran Narayanan teaches at Ashoka University. These views are personal
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
