The really cashless economy

Rural India is putting up a brave face, with even guarded optimism about the fight against black money


Pratap Vikram Singh | December 3, 2016 | Uttar Pradesh

#Cashless Economy   #Rural India   #Narendra Modi   #Demonetisation   #Currency Ban   #Black Money  
It is around 4pm. These women have  been in a queue at a bank branch in  Dhanepur, Gonda since 8 am
It is around 4pm. These women have been in a queue at a bank branch in Dhanepur, Gonda since 8 am

Villages are emptying out, but 67 percent of people still live in rural and semi-rural areas – where there are few banks, where getting to an ATM may take half a day, where many have not seen handheld devices for cashless transactions, where smartphones are rare.

How people in these places are coping with – and reacting to – the bold move to get rid of all black money overnight? To find out, I went to a few villages in Uttar Pradesh. I undertook a 119-km train journey from Lucknow to Gonda, a district where sugarcane farming is the prime, and in most cases, the only source of livelihood. It is a time when the sugarcane crop is almost ready for harvest. Soon the sugar mills will reopen and farmers will carry their produce in tractor-trolleys. Big farmers will ferry it in trucks. 

Day 1
Sunday, November 20

As I came out of the Gonda railway station, the first thing on my agenda was to find an ATM. I didn’t have enough cash. A State Bank of India ATM was on my right; there were just a couple of cardholders inside. I made a dash for the ATM and knocked on the glass door. One of them nodded his head left and right, meaning no cash. Soon an acquaintance arrived on a motorcycle; he would take me to Dhanepur, a small rural market, 20 km down from the district headquarters. We were passing through the town when we spotted a long queue at an ATM. The people waiting there were fighting and howling at each other.

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Dhanepur has branches of SBI, Allahabad Bank, and UP Grameen Bank. The first village where I spoke to residents was Lohari, nine kilometres from Dhanepur. When I reached the house of 24-year-old Surendra Kumar Maurya, he was pouring oil in a motor pump used to irrigate farm. For Maurya, I appeared to be a bank employee, out on loan recovery. “I have cleared my KCC [Kisan Credit Card] dues. What is this about?” a visibly displeased Maurya asked.

His family owns three acres of land, where they sow sugarcane, wheat, rice and mustard. Behind Maurya stood his motorcycle and a couple of buffaloes. “I had three notes of Rs 500 denomination. I was forced to buy oil for the entire amount,” he said, as the nearest petrol pump accepts Rs 500 and Rs 1,000 notes only if you buy oil of the full value. “Otherwise, I could have bought fertiliser too.”

The youngest in the group narrated his experience of standing in queues for days at the bank. He said it is only the poor who have suffered – the rich don’t stand in queues, they have already found a solution to it. An elder man standing on his right snubbed him, “Shut up, fool! What would you know about black money?”

“Par kaam sahi hua hai [but the government has done the right thing],” he said, though not offering any explanation.

Rajkumari lives very close to Maurya’s house. She has two sons and a daughter, and her husband works as a daily-wager in Mumbai. Her eldest son, ten years old, has had fever for over two weeks. She doesn’t have enough money to go to a pathologist for a blood test. She has a bank account, but it doesn’t have money. All that she has is one Rs 500 note. “I went to the doctor a couple of times but he didn’t accept the Rs 500 note.” The doctor gave her medicines – on credit. “He [husband] himself doesn’t have enough money, how would he send it to us?” asked Rajkumari, sitting beside a heap of smoldering dried leaves, grass and tiny wood pieces outside her house in the evening.

She took the Rs 500 note to the Grameen Bank to exchange it with notes of lower denominations. “I couldn’t go inside. There was a long queue. I went even today, but the bank officials said there is no cash.” “Come tomorrow,” a bank official told her.

Shyamlal Maurya, who lives nearby, has a motorcycle repair shop on the roadside. “It [demonetisation] has impacted us. It’s only today that we have had a customer in the last three to four days,” he said. “Only a few days back I needed Rs 5,000 to Rs 7,000 to procure material for the shop, but I got Rs 1,000 after standing in a queue on the first day, and Rs 500 on the second.”

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“The manager at the Grameen Bank says he hasn’t received cash from the currency chest and hence he is helpless,” he said. Naseem Ahmad, a technician at Maurya’s workshop, told me that on a recent visit to the district headquarters, he didn’t have any Rs 100 notes. All he had was a Rs 500 note. “My work had gotten over and I had to come back. But I didn’t have any change. Someone referred me to a middleman at the bus station who would give me Rs 400 in exchange for a Rs 500 note. I went, for I had no choice,” he said.

For 60-year-old Sudha, life has gone back to the old days – of the barter system. She doesn’t have a cash reserve. Every time she has to buy oil, sugar or salt, she carries a few kilograms of wheat and rice with her. She owns a buffalo. She earns around Rs 50 in cash by selling two litres of milk per day. She saves this amount till it grows to Rs 600, enough to purchase fuel for her motor pump. That amount of oil keeps the farmland wet for at least a few days.

There are many villagers, especially the Mauryas and the Yadavs, who own cows and buffaloes and hence earn every day in cash. But not all of them. It has become a routine for residents in Lohari and nearby villages to sell foodgrain to buy essential commodities. The grain dealers are exploiting the once-in-a-lifetime opportunity: since people are forced to sell grain, they are paying almost half the usual price. For example, farmers are selling paddy at Rs 5 a kg, down from Rs 10. Rice is being sold at Rs 6-7, although earlier it was sold for Rs 12. Wheat was sold for Rs 16, it is now being sold for Rs 8.

Ram Lakhan with his wife and six children. He paid Rs.300 in commission to get change for his three Rs.500 notes

In this part of the state, farmers generally cultivate grain in a limited area – just as much as is needed to feed the family. The rest of the farm is used to grow sugarcane and the sugar mills here are always ready to buy their entire produce. The payment, however, is transferred to the farmers’ bank accounts. Unless the cash flow improves, demonetisation can potentially snowball into a nightmare.

It was already dark at 6.30 pm at Lohari. I went back to Dhanepur. I stopped at a roadside shack selling tea and sweets. I asked the owner if ‘notebandi’ impacted his business. “I used to get business of Rs 250-300 during mornings. It has come down to less than a Rs 100,” he said. He has two sons who help him run the shop. He is partially paralytic, and hence a good part of his income goes into medicines.

Day 2
Monday, November 21

Between Dhanepur and Lohari, Anandnagar Chauraha serves as a local market. On Sunday it hosted the weekly haat bazaar. To visit the second village, Suggapur, I stopped at a tea shop at Anandnagar Chauraha for directions. A ten-year-old boy was sitting on one of the wooden logs. He gave me directions to the village with great precision. That day his father had gone out to arrange money for a religious ceremony – his grandfather died a few days ago. The father asked him not to go to school and give him a hand at the shop “as we need cash”. I asked the boy if he knows about demonetisation. He said, “If Modi has done it, it would be the right thing to do.” Not just that. He was overjoyed as he named a minister of Uttar Pradesh and a local Congress leader who have “sacks full of cash”. “Now it will all go waste.”

At Suggapur, I met 50-year-old Liaquat Ali and his family. Since the November 8 announcement, they have been forced to sell wheat at half the price when in need of cash. “Earlier we got Rs 10 for one kg of wheat. Now dealers buy it for Rs 5,” he said.

Ali Ahmad, 28, works in Haryana, and was in his native village for family reasons. He said his work in the village was over and now he was planning to go back to work. He needed Rs 1,500 in cash to buy his ticket and manage the initial expenses. “I went twice to the bank but couldn’t get cash,” Ahmad said. “Today my wife has gone to the bank,” he said. The couple sells wheat to run its kitchen.

For 42-year-old Ramesh Chandra Verma, whose family regularly contests panchayat elections, demonetisation is an opportunity to strengthen his relationship with other villagers. Whenever someone approaches him to get Rs 500 or Rs 1,000 exchanged, he never says no. With these notes, he goes to the petrol pump and buys oil to cultivate his 25 beeghas of land.

Around mid-afternoon, I set out to visit another nearby village. On my way I saw a group of five men playing cards near a floor mill. As I paused, they all quickly stood up, forming a semi-circle. The youngest in the group narrated his experience of standing in queues for days at the bank. He said it is only the poor who have suffered – the rich don’t stand in queues, they have already found a solution to it. An elderly man standing on his right, snubbed him, “Shut up, fool! What would you know about black money? Modi has done the right thing.”

From there I rushed to Sir Bankat village, a few kilometres from Suggapur, where I met 45-year-old Bachraj Shukla, a government-school teacher by profession who owns a farm. “It has come at a wrong time. The person who works my fields will ask for payment in cash. Eventually, I will have to request him to do the work on credit.” How is he managing his daily expenses? “Udhaar kha rahe hain [we are living on loan].”

Tall and thin 60-year-old Ram Lakhan belongs to the Nat community, a Scheduled Tribe. He feeds his six children and wife by begging. He catches snakes, poisonous insects and plucks and clears beehives for a living. He is paid anywhere between Rs 50 to Rs 200 depending on the generosity of his client. He too complained about underpayment by the grain dealers.

For a long time, he had saved three Rs 500 notes. When the demonetisation news reached Ram Lakhan, he couldn’t understand what he would do with those notes. One day he didn’t have cash. “I went to the Babuganj Bazaar a week ago. The shopkeeper was charging Rs 100 in commission for giving change of Rs 500. In exchange for the three notes, I got Rs 1,200.”

It was 5 pm. I headed towards the Dulhapur branch of a nationalised bank to speak to the bank officials about the cash flow. It was 5.30 when I reached the bank. Women and men stood in two separate lines facing each other. Roughly it was a gathering of over 400 people. Two police constables and a guard stood at the gate. They were allowing people to go in batches of four from both queues simultaneously. Inside, the total employee strength was five including a branch manager and a peon. There were three counters: one was managed by a cashier and the other two manned by officials working under the branch manager’s supervision.

The truck full of potato sacks wasn’t unloaded at the Gonda sabzi mandi for over two days. Shopkeepers complained of drastic reduction in consumer demand

On some days the branch provided only Rs 1,000 in cash to most of the customers, and Rs 2,000 on others – never the upper limit of Rs 4,000. The officials said they had no choice: cash was in short supply. While dispensing Rs 2,000, the bank handed over the newly minted currency. For villagers, it was as good as a piece of paper. In emergencies, they will have to trade it for cash worth Rs 1,800. The bank officials, however, were helpless. The bank had limited currency in lower denominations: mostly the soiled notes worth Rs 5 lakh given back by the RBI.

Every second or third day, the bank staff collects cash from RBI’s currency chest at the district headquarters. That day the bank officials had returned by 4.30 pm. The amount had arrived late at the currency chest and then there were some formalities which needed to be completed. The journey from Dhanepur and Gonda town can itself take up to two hours.

The cash-out service was started around 5 pm. Outside, a group of youngsters in their early twenties hurled abuses at the government and the prime minister, while others listened, ignoring them.  

Some customers would demand to withdraw Rs 4,000 or Rs 10,000, citing ill health or wedding as a reason. The bank officials use their discretion in entertaining these requests. To some they say no. To others, who they feel have genuine reasons, they provide the sum over a period of two-three days. By 7.30 pm, every single person standing in the queue had got cash.

The bank locked the entry gate and the officials started their routine work of counting and tallying the physical cash with the amount reflected online.

By 8.30 pm the two constables left. The bank was closed by 10 pm.
Day 3
Tuesday, November 22

On the third day, I visited several roadside tea-cum-sweet shops, meeting points for people in rural and semi-urban places, on the road connecting Dhanepur and Babu Bazaar.

My first halt was around 10 am at one such shop. A priest, an old woman and a few other people were having tea. An easier way to start a conversation was to ask the shopkeeper if they accept payment in Rs 500 note. The response is obvious, but it sets the context for a conversation. The shop owner said that since ‘notebandi’ has been announced, the number of people coming to the shop has reduced by half. “By this time 20-25 people would be sitting here,” he said. Only half a dozen customers were sitting now.

I asked if he supported the government decision; he replied he had little hope. “Nothing will happen to the rich,” he said.

In the next three visits to the tea shops inside villages and on the roadside I heard similar complaints from the owners. At one of the tea shops the owner told me about what he had read in the local newspaper: vegetables were rotting in the mandi as there were no buyers. So I decided to go and take a look.

It was around 1.30 pm when I reached the mandi. It has a total of 80 shops and four platforms. Between November 8 and November 22, 20 shops have closed down. Hamid Ali Rainee, district secretary of the Akhil Bharatiya Udyog Vikas Mandal, who also trades at the mandi, said that some 15 truckloads of potato, onion and ginger usually arrived there from Punjab, Maharashtra and western UP. Now, it’s just two. “My business has shrunk from Rs 10 lakh a day to Rs 1 lakh,” he said.

The demand has reduced everywhere and hence the lower supply, he said. Rainee pointed out piles of rotting ginger and onion. It will all perish soon, he lamented. Paying workers has also become a challenge. The drivers and transporters too refuse to work on credit, he said.
The situation at the fruit market is no different. Noor Mohammad, 28, is a wholesaler of fruit at the mandi. He said they used to sell 75 cartons and earned Rs 75,000. Now it has come down to 25 containers and Rs 25,000 per day.

(The story appears in the December 1-15, 2016 issue)



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