Grinding to a halt

The response to the Narendra Modi government’s sudden jolt to the country’s monetary policy ranged from adulation to shock.

Published : Nov 23, 2016 12:30 IST

A worried landlord fills out forms outside Jadcherla’s post office for each of his seasonal farmworkers to get his invalidated Rs.1,000 notes exchanged.

A worried landlord fills out forms outside Jadcherla’s post office for each of his seasonal farmworkers to get his invalidated Rs.1,000 notes exchanged.

OUTSIDE the post office at Jadcherla in Telangana’s Mahbubnagar district, a local landlord frantically fills out forms to turn in his wad of 1,000-rupee notes. One form for every Rs.4,000 for each of his seasonal employees—Banjara tribesmen and women who work in his paddy fields during the harvest season. The landlord is worried that he might be asked to produce income records for his life savings, mostly in 500- and 1,000-rupee notes which the Central government invalidated as legal tender overnight on November 8.

One of those waiting for her form to be filled is Shanti, who is in her forties. She has been engaged in road-building work for the past 14 years except this year, when farm labour has been in demand as the rains have been good. The arrangement with the landlord is that he will pay a day’s wages—Rs.150 for women and Rs.200 for men—for standing in the serpentine line at the post office and “something extra for chai aur pani ” (tea and water), says Shanti. They produce a photocopy of a government ID, mostly Aadhaar or ration cards, along with the forms and the currency, and the post office returns the Rs.4,000 in newly printed Rs.2,000 notes or worn-out Rs.100 notes, which the landlord takes back.

Less than five minute’s walk from the post office, the main wholesale vegetable market of this town with a population of about 18,000 is near empty at 9:30 a.m. Mohammad Abdul Salim, a wholesaler selling mainly chillies, says that usually most of the produce would have been sold by now, but not today, November 15, a whole week after the big currency recall. Salim’s bags of chillies lie on the road unsold. Most customers buy produce for a few hundred rupees. “I don’t have change when they give me Rs.2,000 now!” says Salim, exasperated.

Ramulu, another wholesaler within earshot, says people are panic-stricken. He says: “One normally needs about a kilogram of salt per family every month. But at the market yesterday, I saw people buying 10 kg. Everyone is afraid they will run out of money.”

About two kilometres away, outside the local State Bank of India (SBI) branch, a jeweller-cum-pawnbroker gets a Lambada tribesman to affix his thumb impression on a promissory note to return Rs.1.85 lakh of the Rs.2 lakh that he has “lent him”. The deal is for the jeweller to pay off the latter’s farm loan of Rs.15,000 in return for this favour. The rest of the money is to be paid over a period of time free of interest.

Inside the bank, it is utter chaos. A worn-out employee says there has been no let-up in the near stampede-like situation for the past week, and “most” of those coming in are not customers. They are there to exchange Rs.4,000 as cash, as that is the amount the bank had been authorised to dispense to a single customer each week. The official says that those with more cash simply take the rest to the next bank and get another Rs.4,000 exchanged there. This was a day before the government decided to use indelible ink as a way to prevent people exceeding the exchange limit.

“We believe that several of those coming in to exchange currency are agents for hoarders, but we cannot tell for sure,” says an SBI official who did not wish to be identified. He hopes the Reserve Bank of India’s audit after the deadline of December 30 to return 500 and 1,000-rupee notes will give a better picture, if at all, as to whether there has indeed been any recovery of unaccounted wealth. “Until then, we will keep all the records,” he says.

It is as if Mahbubnagar’s overwhelmingly rural economy had come to a near standstill, but the response to the Narendra Modi government’s sudden jolt to the country’s monetary policy ranged from adulation to shock.

Back at the vegetable market, Venugopal, a wholesaler-turned-“auto finance” dealer, says: “I read in the papers, in WhatsApp and in other social media that fake currency worth Rs.20 lakh crore has been taken out of the system. Hafiz Sayeed has been sending this into India through Jammu and Kashmir. The government should go after the Vijay Mallyas of the country next.” Ramulu, standing next to Venugopal, also approves of the policy but disapproves of the “timing” to introduce Rs.2,000. He says it is easier to hoard, say, Rs.10 crore with Rs.2,000 notes than it would be with Rs.500 or Rs.1,000 notes. The latter “takes up more space”, says Ramulu. He also wishes the government was better prepared, with pre-calibrated ATM machines to dispense Rs.2,000 notes and wished the recall of the Rs.500 and Rs.1,000 had been done in a staggered manner.

But 40-year-old Mohammed Nayeem Irfan, who joined the ruling Telangana Rashtra Samiti party four years ago, is a worried man. He has a poultry business and sells 10,000 eggs a day. Until November 8, the going rate per egg was Rs.3.91, he says, but that has now dropped to Rs.3.50 as wholesalers complained of a cash crunch, citing looming tax payments. If the trend continues, Irfan calculates a revenue loss of about Rs.1.5 lakh every month. “The rural economy runs on cash, even if it is in lakhs of rupees. All of the money is rotated from one business to another. All our savings are also in cash. How are we to pay daily wagers, for chicken feed, or to buy groceries? And how can we be sure that we can get back the money once we deposit it in the bank? Some families have Rs.10-20 lakh in cash, but that’s their savings for the past 20 years! Would all that be taxed now? And how can they prove that it is genuine income? No one maintains receipts!” says an anxious Irfan.

A high-ranking officer in Telangana’s Panchayati Raj and Rural Development Department, however, sought to dispel such fears. He pointed out that agriculture was free from income tax and that most farmers knew this already.

He said: “If somebody has commensurate landholdings to justify having such large amounts of cash, then the banks should accept it as genuine income. Look, farmers don’t normally operate bank accounts, and most people don’t deal with cheques. The fact is that the practices which people are used to have been disturbed, so naturally they are worried. But going cashless is the future. They will take to banks the way they took to mobile phones or cable TV. It is only a matter of time. Deepening the government’s e-seva portal and other such measures will help.”

Hyderabad, which is just 80 km away from Jadcherla, suddenly felt a world away.

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