Demonetisation

Persistence of misery

Print edition : March 31, 2017

Labourers waiting for work in Mumbai on December 5, 2016, when the impact of demonetisation had begun to be felt. Photo: Paul Noronha

Artisans in Moradabad, a file picture. Photo: PTI

Industry continues to reel under an immense amount of job loss across various sectors following demonetisation, but the government remains oblivious to the ground reality.

“I AM an exporter of handicrafts. It is the second largest sector after government jobs in the country, and lakhs of people are dependent on this for their livelihood. Transactions in the sector are mostly cash and the education levels among the artisans and traders are more or less the same. Our industry has been hit hard and has not yet recovered from the blow of demonetisation. We have been unable to pay the artisans and craftsmen. There has been a 22-100 per cent loss in business. I paid wages in three instalments to the workers as there was a shortage of cash. People are scared of criticising demonetisation but children will remember in the years to come.”

These are the words of Shafaat Khan, an exporter and manufacturer of brassware and other items based in Moradabad, Uttar Pradesh. Moradabad, one of the leading industrial corridors in the country, exports brass goods alone worth Rs.2,200 crore every year, according to the Agra-based MSME Development Institute. There are some large-scale units but the small-scale industries (SSIs) are the key drivers of the city’s economy and employment.

Nearly 10 lakh people are engaged in the handicrafts business, including manufacturing, in this city, which is also home to a thousand exporters. There are 18 districts in Uttar Pradesh where the handicrafts industry is a primary source of livelihood. But the Centre seems oblivious to the concerns of Shafaat Khan and other exporters like him.

During Question Hour in Parliament in the most recent session, when opposition members quizzed Minister of State for Commerce and Industry Nirmala Sitharaman about the reports of job losses due to demonetisation, the Minister said the government had not received any such information and added that there were no data to support such claims.

The government had clearly not considered it important enough to collect data on the economic hardship caused to people, both long term and short term. Responding to another query, Union Labour Minister Bandaru Dattatreya denied that there had been loss of employment in any form in the last three months. He quoted from a report of the International Labour Organisation (ILO), which said that there would be a decline in the rate of unemployment from 2016 until 2018, but refused to comment on any specific loss of jobs due to demonetisation. The Union Labour Ministry has been in the forefront of introducing several amendments to labour and wage laws in order to facilitate the digitisation of wages, notwithstanding the lack of feasibility.

The Fifth Annual Employment-Unemployment Survey of the Labour Bureau (2015-16), which was released in September 2016, two months before demonetisation, made the following observation: “It is pretty well known that many of the persons who are reported as ‘employed’ or ‘workers’ in official publications do not get work for the entire duration of their stay in the labour force. And even those who get some work or the other for the entire duration may be getting work for only a small fraction of the time they are available for work. This apart, some may be working on jobs that do not allow them to fully utilise their abilities or from which they earn very low incomes. All this constitutes underemployment which remains a worrying aspect of the employment-unemployment scenario.”

It was no surprise, therefore, that the Bharatiya Mazdoor Sangh (BMS), the trade union and ideological affiliate of the Rashtriya Swayamsewak Sangh (RSS) and the Bharatiya Janata Party (BJP), which had earlier welcomed the government’s decision, reacted sharply to the Union Budget for not making provisions for the workforce adversely affected by the shutting down of many industries. Some 2.5 lakh unregistered units have reportedly been forced to close down, causing tremendous misery to workers. The BMS also pointed out that the real estate sector, which it said was founded on the basis of “black money”, had been badly hit, throwing crores of workers out of work. “We had hoped that the government would make some announcement in the Budget for the working class but it didn’t,” Virjesh Upadhyay, general secretary of the BMS, told Frontline.

The union objected to the government’s use of the Rajasthan model of labour reforms for the entire country and pointed out that the proposed changes in labour laws had been opposed by every trade union in the country. There had not been any spurt in investment or industrialisation in Rajasthan, as was expected, subsequent to the changes in labour laws in the State, the BMS said. It also objected strongly to the Central government’s move to sell its stake in public sector enterprises and the dissolution of the Foreign Investment Promotion Board (FIPB). This was in sharp contrast to the BMS’ November 25 statement, in which it appealed to “labourers and common people of the country to take the initiative to make demonetisation a success”. The union had also hoped that the revenue collected following demonetisation would be used for greater spending in the social sector, and for the strengthening of the social security fund and infrastructure. On February 1, it said: “There was huge revenue collection through demonetisation but [the] same has not been transferred in social spending.”

Losses and declines

Surveys and studies conducted by employer organisations have indicated the magnitude of the crisis, notwithstanding the government’s denials. The All India Manufacturers’ Organisation (AIMO) estimated that some 30-35 per cent of the jobs had been lost following the decision and said that the figure could escalate to 35-60 per cent in March. The AIMO conducted a survey on the impact of demonetisation in the first 34 days after the announcement on November 8 and concluded that all industries had suffered a hit, small and medium enterprises being the worst affected. A report by the Centre for the Monitoring of the Indian Economy stated that 48 per cent of the workforce had lost its income; daily wage labourers accounted for 25 per cent of this group, 8 per cent comprised self-employed entrepreneurs, small traders and hawkers, who suffered a hit as their income and businesses were both affected, and the remaining 15 per cent comprised businessmen and organised farmers. The salaried class was less affected in comparison. The report also said automobile sales in December recorded the biggest decline in 16 years. Leading automobile companies based in Gurgaon laid off several workers following a dip in demand.

Rajiv Jain, general secretary of the United Cycle & Parts Manufacturers Association, told Frontline from Ludhiana in Punjab that workers had left in huge numbers. “We are left with only 25-30 per cent of the workforce. The orders [have] also declined. The worker is not ready to accept payment by cheque. He loses wages,” he said. With the demonetisation move coming during the wedding season in north India, the sales of bicycles, the lowest priced in the two-wheeler segment, also dipped. Bicycles and cars are usually gifted during weddings. Jain said that not only did demand and production go down, but the prices of steel and plastic went up. “The second blunder was to insist on payment by cheque and RTGS [real time gross settlement]. Work slowed as a result. We are mainly surviving on government tenders. We supply parts and if the commissioning companies tell us to lower our rates, we have to. To date the government has not told us what it gained by demonetisation,” he said.

Tapan Sen, Rajya Sabha member and general secretary of the Centre of Indian Trade Unions (CITU), said that the estimated job loss was up to a million. “The Labour Bureau figures tell us that only 1,15,000 jobs were created,” Sen said, referring to the Fifth Annual Unemployment-Employment Report.

Twin attacks

Located a short distance from the busy Meerut road in Ghaziabad district in western Uttar Pradesh is the 25-year-old building of the regional branch of the AIMO. The building, like the once-vibrant industrial area of Ghaziabad district, which includes Sahibabad, the largest Assembly constituency in the State with nine lakh voters, is a relic of the past. Yet, a large part of the rural populace and people from other States such as Bihar, Jharkhand, Madhya Pradesh and Chhattisgarh still flock to the “labour chowks” in search of employment, mainly in the unorganised sector. On the basis of feedback from industry, O.P. Gupta, executive director of the organisation, said that nearly 80 per cent of the small units in the area spanning the National Capital Region had shut down. Most of the SSIs were in the unorganised sector, mostly employing migrants.

Units in both unorganised and organised sectors in the small-scale industry had to wind up operations owing to a paucity of cash. They included food-based and beverage industries that deployed workers during specific seasons. There were also manufacturers of heaters and coolers that operated seasonally. Most of the workers did not know how to operate bank accounts. “All such labour is migratory in nature. They don’t have bank accounts in all the cities they land up for work. They don’t want to be paid by cheque. If this pressure to pay by cheque continues, industry will face a big problem,” said a bakery owner. Narrating his problems, he said that he was given 10-rupee coins as he refused to accept old notes.

“I deposited Rs.10 lakh in old notes. Now, a new form of harassment has started. We have to send replies to the I.T. [income tax] Department explaining the source of the money deposited. Do I conduct my business which has already taken a hit or should I spend time replying to these queries?” he said.

The deindustrialisation of Ghaziabad has been happening over the years. There were industrial cities like Modinagar, which boasted every kind of industry and was home to a dedicated railway station. Industrial areas soon gave way to malls and shopping centres. Post-demonetisation, some 10,000 workers in the power loom units of Muradnagar, another industrial area, have been displaced. “They protested but nothing happened,” said Dinesh Mishra, district president of the CITU. He said that trade unions like his realised the magnitude of workers’ hardship after members expressed inability to contribute even nominal amounts for union-related activities.

As construction work came to a halt, with even some of the big names in the industry discontinuing work, construction workers were left stranded.

Labour frustration

The “labour chowk” at Nasirpur railway crossing is among the 24 “labour chowks” in Ghaziabad district. There are designated areas where men and women are picked up by contractors for work in industry or by individuals on the unsaid principle of daily wages. People seeking work gather in these areas between 5 a.m. and 10 a.m. to get work that is manual in nature. At any given point in time, there would be around 500 people, mostly men but some women too, waiting in anticipation. Many educated youths have also been found to throng such chowks in search of work. There are no shelters built for such labour; they have to wait in the open at all times round the year. In Ghaziabad, they come from nearby districts as well as other States such as Jharkhand, Odisha, Chhattisgarh and Madhya Pradesh.

Demonetisation has hit them hard. “We get work only once in 10 days. How can a man feed his family with just 10 ten days of work? Even if we do the job required of us, the contractor does not pay us. He deducts wages at will. We do not even get the rate fixed by the State government. We are at their mercy,” said Mohammad Shahid, a worker in his fifties. Some of the big names in the construction sector deployed contractors to source labour for them but did not ensure that the workers were paid for the work done.

Sometimes the wait stretches until 6 p.m. after which workers return empty-handed and go hungry too. The impact on real estate work has hit them hard. “Even today there is no work. Now we have workers who have been sacked from companies joining us here. What benefit did we get from notebandi? Already there was so much of harassment. Has any political party spoken about doing away with such labour chowks and ensuring that men and women do not have to stand like this to sell their labour? It is a shame that such chowks exist in a country like ours,” said Umesh Kumar, a graduate. Many, he said, had returned to their villages.

Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises (FISME), said that the real impact of demonetisation would be felt over a year and a half. Close to 90 per cent of micro, small and medium enterprises (MSMEs) are in the unorganised sector and only 7-10 per cent in the organised sector (hiring more than 10 persons and registered under the Factories Act). The average number of people employed by MSMEs, as per the last survey, he said, was two. A very large number of them are very small units and deal almost entirely in cash. Their operations were cash-based; they bought raw material, paid wages and sold goods in cash. “Markets are cash-based, so that explains the high dependence on cash. There are more than 3,000 traditional clusters and around 400 industrial clusters too, like in Moradabad,” said Bhardwaj.

Production had been severely hit, in the range of 30 to 70 per cent depending on how much cash was used. Day-to-day functioning was badly affected. As cash availability improved, demand took a huge dip. People were holding on to their cash and not spending it. “Whatever we were producing was not being sold. Operations were scaled down. There was a permanent opportunity loss. It was the peak period for marriage season in northern India. The stockists of white goods like refrigerators and television sets, and cars and other expensive items, mark the calendar in northern India, targeting such sales for the wedding season. Their sales have been 40 per cent less in the peak marriage season and we are talking about north India. We will get to know the real impact in one and a half years. One can defer buying a car; but if I skip eating today, I cannot eat tomorrow. People couldn’t hire banquet halls, etc. It was an opportunity loss of earning wages. And these are not rich people,” he said.

Fear of raid raj

The third challenge was the push for digital payments without the requisite infrastructure. “Suddenly, we had the poorest people using cutting-edge technology to make payments. The cash option earlier was at zero cost but now digital transactions were to cost 2 per cent or so. Why should it be forced on people? And there was no cash to pay wages,” said Bhardwaj. MSME employers were now apprehensive that their costs would go up if they had to pay social security to the workers. Business was also apprehensive of the “raid raj”. The option, the FISME head said, would be to close shop. According to him, the organised sector was shrinking, the government was not hiring, and agriculture was unsustainable to support livelihoods. MSMEs are connected to rural markets. Construction activities in villages, for instance, were cash-based. Barring cement and steel, which form part of large industry, every other component in construction was manufactured by small-scale units.

Employers believe the digital push can upset the balance. According to Bhardwaj, rural India was entirely cash-dependent and relied on the products produced by MSMEs. Though trade unions have been insistent that MSMEs ought to comply with labour laws and have been at loggerheads with MSME representatives, demonetisation only worsened the situation for the unorganised sector working class, pushing them into further uncertainty and unemployment.

“People have not recovered from the decision to date,” said Shafaat Khan in Moradabad. The operations of metal casting in brassware work required coal, which had to be paid for in cash. “If there is no casting, there is no grinding, welding, forging or moulding. And then the costs of raw materials went up. We have fairs, domestic and international, in February where we get orders from four places—Delhi, Paris, Hong Kong and Frankfurt. The rates are discussed at these fairs. But we have not been able to take orders,” he said, adding: “ Abhi to khaali baithe hain [we are sitting without any work].”

The Central government has no excuse for not taking remedial measures on the basis of feedback, anecdotal and otherwise. Rather, several luminaries of the government were part of a campaign and telethon organised by a leading media house where viewers were encouraged to pledge to a less-cash and digital economy. As per reports put out by the media house, Minister Nirmala Sitharaman had stated that demonetisation had not had any recorded impact on jobs. “Saluting” those who had “spread awareness about digitisation”, she stated that the “impact on jobs, if any, was only in the first 10 days of demonetisation”. The campaign, titled “Remonetising India”, involved a range of celebrities taking a pledge to “remonetise” India through a less-cash economy, ostensibly to help out those who needed it most.

The employment situation prior to demonetisation was already bleak. The Labour Bureau findings showed that 77 per cent of households had no regular wage earner or a salaried person. And only in three north-eastern States—Tripura, Manipur and Meghalaya—had more than 70 per cent of the households benefited from the Mahatma Gandhi national Rural Employment Guarantee Act. Some 46.6 per cent of the workforce was self-employed and only 17 per cent was salary or wage earners. Clearly, there was enough evidence to show that it was this section that had been badly affected since November. The paucity of data was not the problem; what was missing was empathy and a course correction to offset the misery people suffered through no fault of their own.

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