Ubiquitous
Christmas of 2014 had been christened Good Governance Day by the newly-elected NDA Government. Offices had been kept open to…
Initially hailed as a big bang reform aimed at weeding out black money and corruption from the system, the government’s decision to demonetise high value currency notes has turned into a nightmare for many. As scramble for cash continues with no immediate relief in sight, experts say cash crunch may lead to economic slowdown.
Meanwhile, anger on the street was increasing as thousands of cash-strapped people continued to stand in long serpentine queues at banks for the eighth consecutive day. On Wednesday, most ATM machines ran out of cash within hours and many bank servers faced technical glitches adding to the customers’ woes.
The situation is not likely to change anytime soon, raising fears of a slowdown in the economy. Prime Minister Narendra Modi on Monday sought 50 days’ time to make India free of black money. Earlier, Finance Minister Arun Jaitley said it would take three weeks before all the ATMs start dispensing cash. A total of 14 lakh crore, 86 per cent of the value of the currency in circulation became useless after November 8, as the government scrapped all the high value notes of Rs.500 and Rs.1,000, leading to a cash crunch. In India, 86 per cent of the cash transactions are done in cash.
Meanwhile, common man is feeling frustrated with little money in hand. “One thinks twice before spending even Rs.10,” says Neelam, a resident of Mayur Vihar, adding that since she could earlier withdraw only Rs.2,500 from the bank she will have to save it till the situation becomes normal. There is going to be a huge blow to purchasing power.
The businesses have started getting impacted as consumption goes down. Most markets wear empty look as people postpone their purchases in the wake of cash crunch. Jewellery shops in Delhi remained closed to protest the demonetization move. As the disposable income goes down, people’s consumption patterns have been impacted, leading to a negative impact on ration shops, vegetable and fruit vendors. Recently, online retailers Flipkart, Amazon and Snapdeal stopped cash on delivery, the most preferred option for online shoppers.
The demonetization will hurt agriculture and informal sector workers who earn cash incomes and disrupt India’s consumption patterns for the next quarter, as per a study conducted by the international consulting firm Deloitte. The informal economy employs 80 per cent of India’s workforce that includes workers in small and medium industries, grocers, maids among others.
According to former chief statistician of the country and director of International Growth Centre Pronab Sen, demonetisation has penalised the entire informal sector and damaged it permanently, especially the informal financial sector.
-By Anjul Tomar
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