A story is popular in the villages. Some thieves entered a village in the dead of night. When the villagers raised an alarm of “chor”, “chor”, to escape identification the thieves joined the ruckus and themselves started shouting “chor, chor”. They ran around with the villagers in the darkness, looted what they could and by morning bolted with the booty. Modi is doing just that.
Demonetization of high currency notes by the Modi govt. has in one shot ruined vast sections of agricultural economy and rural markets because it has been accompanied with deliberate creation of a huge shortage of small currency, continuing and increasing restrictions on withdrawals, replacement with only difficult to exchange Rs 2000 notes- those too in short supply.
It is noteworthy that the govt. consciously barred rural banks from exchanging old notes from day one. Though after peasants’ protests the govt. permitted them to withdraw up to Rs 25,000 per week, the rural banks never had that kind of cash to give. Thirdly, though the govt. announced after about two weeks that fertilizers and seeds would be available in old notes, the currency had already lost a lot of credibility and Govt. outlets are known to have poor and restricted quality of both. To top it all, Modi’s much propagated Fasal Bima Yojnas did not spare the peasants. They were forced to adjust, they postponed the last date of premium deposit, but they still wanted peasants to pay up.
Smaller notes were assessed to be around 14 percent of all currency. This serious cash crunch has had a disastrous impact on all cash operations, particularly small and medium shops and farm trade, forcing peasantry in particular to sell in distress, to barter, sell on deferred payments and take to usurious borrowing, even as old debts remained and rose due to continuing interest. Though peasants have not been able to sell their paddy and obtain cash to repay their KCC loans, the loans stand, the interest rises and they are denied new KCC loans, having defaulted in repaying the old ones.
The immediate impact was on the sale of that kharif crop which is harvested during November. Paddy for example is selling for as low as Rs 800 per quintal in cash in different mandis though its MSP is Rs 1470, i.e. at 40-45% less! For the ordinary peasant this is against the normal distress sale rate of 20% less than the MSP. In Punjab, Haryana and West UP where harvesting was completed prior to demonetization, it fetched between Rs 1250 to 1300 per quintal. Gradually now, with sustained cash deficiency and govt. procurement centres not operating, sale of paddy has been almost completely restrained. Better rate of up to Rs 1200 is being offered by millers, but on payment deferred by 2 to 3 months!
Trade of perishable goods including vegetables and fruits has also slowed down drastically and is probably the worst affected. This is having an adverse impact on their growers. Normal flow of these items in mandis has come down by almost 75%. Even small mandis like Jasra in Allahabad which normally had a supply of 20 truck loads are happy to see 4 to 5 trucks coming in. Vegetable and fruits are supplied from as far as 50 to 100 kms to city mandis. With the rates falling and no guarantee of sale, peasants are unsure of obtaining even the transport costs and many have stopped risking the supply. Those who are managing to get their supplies in are often told to sell at deferred payments. It has been reported that chillies, potatoes and tomatoes have sold for as low as Rs 1 to 2 per kg in Haryana mandis. Similar stories are coming from Nasik, Hapur and all the known mandis of the country. In Lucknow one peasant openly gifted bags of potatoes free of cost as they would not fetch even the transport cost.
This fall in rates has affected all perishable items and is sustained. Peasants selling in Jasra for example, experienced sudden fall in rates on November 9th and it has remained low ever since, picking up only by about 5 % for some items by Dec 20th. The rates of brinjals fell from Rs 1300 per quintal to Rs 600, for cauliflower from Rs 1000 per hundred to Rs 400 per hundred, for potatoes from Rs 1000-1200/q to Rs 600/q, for chillies from Rs 1500 -1600/q to Rs 800/q, for tomatoes from Rs 2000/q to Rs 1000/q and for the in season internationally renowned guavas from Rs 2500/q to Rs 1200/q.
Though most govt. procurement centres for paddy have not opened, the one in Jasra has, only to refer all the peasants to the millers. As the supply to the markets is increasing with the harvesting underway, the rate for cash purchase has fallen. There are several big traders who are taking advantage of this situation, have opened ‘arhats’ in Jasra and Jari markets and are purchasing paddy in cash at an open rate of Rs 800/q, a rate which is likely to fall further.
Currency distress has also affected sugar cane growers, who normally sell on deferred payments and accept cheque payments. Even where they have received their cheques, which amount to a few lakh rupees, the cash withdrawals from banks have been limited. This has led to delay in sowing the next crop, to private borrowing and usurious rates. Fall in cane prices have also resulted from some dip in prices of cash cane sale in this period of cash crunch and in some areas rates have fallen by more than 20%.
Agriculture requires ready cash payments at every step – to purchase seeds, fertilizers, insecticides, tractor time for tilling and harvesting, labour payments, diesel for irrigation, etc. There are several reports of both labour operations and crop sale and purchases happening on credit and through bartering. Such exchange always leads to un-kept promises with the weaker suffering the loss.
Though there are various news reports that sowing of wheat, pulses and oilseeds is higher this year than it was at the same stage (dates) last year, the fact is that the cash crunch has adversely affected the economy of the peasants and it is bound to have its negative effect on the sowing of the next crop. Union Agriculture Ministry has already claimed that total rabi season acreage is 327.62 lakh hectares as compared to 313.17 lakh hectares in 2015 even though the sowing season has not ended. Analyzing the various factors, one can assess the full impact only later, but as has happened in West UP, after Kharif harvesting before November 8, sowing of vegetables was normal, while sowing of wheat, which takes place normally after mid November, has been adversely affected. Punjab Agricultural Department, where sowing gets over early, has declared 5% reduction in acreage this year due to demonetization. Another report claimed ‘complete’ acreage of 35 lakh hectares in Punjab, but it also mentioned that DAP sale, which is required before sowing, was only 90% of normal. Those sowing wheat have had to resort to widespread borrowing from the infamous ‘Arhatiyas’, the Commission Agents of Punjab, numbering 26,000 in the state. Arhatiyas have been at the centre of causing peasant suicides in Punjab. Those who have grown vegetables are managing their required intensive labour operations by bartering food grain for wages; ‘cashless’ if you please.
The cash crunch has led to very serious consequences for rural labour in all sectors. MNREGA work has almost stopped. With decreasing budget allocations, low wages and deferred payments, despite all payments being through the banks, it had already come down drastically even before the demonetization. Now with severe restrictions on cash withdrawals and with the burden of standing for long in the queues no one is even talking about MNREGA work. It is estimated that it is just around 25% of what was being done last year this time. Further, vegetable farming, plucking, transport to mandis, carting and sale in the mandis are all heavily labour dependent activities, requiring daily operations. These have come down drastically. Decreased procurement and sale of paddy too has adversely affected labour, particularly with respect to immediate payments. Construction work in big as well as medium projects too has been affected adversely and is affecting rural employment.
Another area which has been severely undermined has been transportation and this too has impacted employment and food supply. Ordinarily a truck needs to spend about Rs 10 per km and ‘cashless’ existence has prevented truck operations. The long term impact is yet to come and will possibly come in the form of increased transport costs. There are some pointers to this. Wheat prices have begun rising in areas depending on supply from outside. Cotton supplies have fallen drastically after demonetization leading to a rise in cotton prices.
Small and middle level industries and traders have been forced to down shutters and send their employees home as there is little business. A good example is of purchases made by rural people. Cycle sales have come to almost zero while there is a strong dip in rural two wheeler sales. It is the national bourgeiose which has been attacked and hence it is not surprising that Tatas, Ambanis, the compradore sections and the American Imperialists have openly supported ‘demonetization’.
One thing is very obvious from the actions taken by the Govt. and its continuously changing stance and changes in the declared objectives since November 8 – the Govt. is very conscious and very sure about what it was doing and it had meticulously planned its actions and responses. It is the work of a very mischievous, fascist mind, dedicated to the service of the corporate and an enemy of people. For example the cash shortage that has been created was craftily designed to ruin the small businesses and agriculture under the veil of attack on ‘black money’. After declaring demonetization, deliberately only the 2000 rupee note was issued while adequate supply of currency of all other denominations could have been released. Modi govt. created mass hysteria about attack on black money with demonetization, i.e. de-validating the 500 and 1000 rupee notes and of only a little trouble to and 50 days of sacrifice by the poor in standing in bank queues. Then within a few days only, further restrictions were imposed on bank withdrawals, reducing the amount, inking the fingers, not permitting repeated withdrawals by single person etc. Along with this, within a week came the announcement of promoting and moving to cashless exchange, using swipe machines, credit cards, etc. And then incentives were announced of reducing charges on cashless transactions under various categories and of monthly lotteries on cashless transactions for which about Rs 250 crores would be spent.
There is an obvious design in this madness. It is purposeful and certainly dedicated to achieve a goal. The effort has been to consciously create cash shortage, sustain it and force people into cashless transactions. Of course small shopkeepers, peasants by themselves also went in for cashless exchange to the extent possible, by giving goods on credit, trying to buy their stocks on credit, bartering, etc. But they reached their limit very soon. Such credit normally ruins small businesses. That impact has been affected. A number of small shops, kiosks, carts, will not be in business any more, even after the cash crunch eases.
People innovated. To overcome the problem of exchanging high value 2000 notes some shops also accepted advanced deposits and there was also news of petrol pumps and toll plazas issuing coupons of low value which would be honoured by them. That too has not lasted.
The Govt.’s plan has been to force more exchange through bank accounts. To this end they have planned and designed even small cash transactions to be accounted for through banks. They have issued POS, i.e. ‘Point of Sale’ centres, two for every village with a population of 10,000 and Unified Payment Interface or UPIs. These have come into the news exactly one month after the distress of cash-less-ness and are being propagated as a solution. They are meant to not only promote sale of commodities and services of all kinds, consumables, edibles, agricultural inputs, ticketing, insurance, PAN card registrations, payment of school fees, electricity bills and other govt. dues, share market operations, etc. through a commercial POS or UPI which will obviously charge a commission. These are to be under public – private – partnerships, PPPs. The govt. has already moved the banks in several places to open CSCs or Common Service Centres, which are like bank outlets having cash disbursement facility and operating through finger print recognition. These have been opened by banks, but soon they will be franchised to Village Level Entrepreneurs or VLEs.
What will be the impact of these several measures to operate cash services and sales through electronic and internet connected service centres remains to be seen. Obviously a section of the Indian population, already ‘developed’ to the level of operating commercial transactions through cards is happy at this imposition on the ‘insensible’ rustics, who can’t for nuts understand ‘development needs’ and ‘have to be made’ to follow the new dynamic. For them technology needs to be imposed on the people, as India can’t be left behind. It is another issue that even in the most developed countries none of these measures is imposed and is yet only partially used, catering to a minority of the transactions. There it is simply provided as a facility. In India on the other hand there is a fascist streak in its propagation, led today by BJP cadres and an aggressive media monopolized by big business and in the rural area by aggressive landlords, who too actively profess that this is a measure against black money. But all this, including ‘attack’ on Black Money is not being systematically and comprehensively opposed by the parliamentary opposition. They mostly refrained from mobilizing the people as it is not their agenda and they cannot disturb the interests of India’s ruling class.
For cashless transfers, Paytm’s and its ilk are also being promoted in which money is deposited, as in a wallet and released through the mobile into the recipients Paytm account. It is like keeping a virtual wallet on the mobile phone.
Ultimately these are all measures to force rural populations to adopt transactions linked to the banks in place of cash. Whenever the cash flow improves, several of these transactions will recoil back to earlier positions, but villagers too will adopt some cashless transactions through these centres and as forced by the Govt., as with the Aadhar card or as is incentivized by commercial considerations. And they will all be under greater pressure to have Smart phones, payment Apps, Aadhar Cards, etc.
What does this have in store for peasantry and rural poor? Well, none of this will change the rural social relationships, in fact they will further strengthen landlord stranglehold over the poor. Essentially some of the personal expenditures made by villagers will come to be publicly known due to its transaction through the POR, CSC or VLE. It will become a reason for the landlords to pressurize the poor for extractions. Secondly, most villagers, being illiterate and unexposed to this technology, will depend on those who have some knowledge and will end up paying them a service charge as has happened with bank operations.
As one write up in Indian Express noted “Digital wallets are for those with some experience of the way digital transactions work. The unlettered, the elderly, and those without smart phones will be largely left out. Poor connectivity and patchy Internet are serious challenges.”
Actually this measure is an attempt to push banking operations into rural small money transactions and small trade. After promoting micro lending in rural areas this appears to be the latest effort to enter into micro expenditures, small trade. It is a tool which will help the profits of large corporate including MNCs in selling directly as is being promoted by Flipcart, Snap Deal, Amazon, Alibaba, EBay. It will help banks to get transaction cuts. It will also help them to implement the GST, which is a tax favouring the MNCs and Corporate by bringing at par small traders, small producers and big operators.
It will help the govt. which can plan to move transaction taxes, a new form of indirect tax. It has been argued for some time now that even if a very small tax is levied on transactions, it will increase the tax net and collections several times. This has been under consideration for some time and was once proposed by European Union also to enable charging transaction tax on international payments, when it was thought that the taxes imposed on China and India will be enable Europe to tide over its crisis. In India there are discussions on making a charge of 0.1 to 0.7% transaction tax.
Of major importance here is the fact that agricultural income has so far been exempt from taxation. It has often been aggressively argued, and more so by BJP and RSS that this is a window for money laundering by the rural rich and powerful politicians and should be brought under the tax ambit. While this may be true for a small section, the big landlords, the fact is that agriculture is a loss making activity and important portion of the investments in it comes from the labour done by peasantry at other places. India also faces a hugely negative agricultural subsidy with diesel being sold at more than double its cost price. Yet a section of India’s rich attack the agri sector for not paying taxes. There is also no easy way for them to assess it and tax the ‘income’. Transaction tax is a conspiratorial method to enforce such a tax on all peasants. Even at 0.1% it is a huge tax and an indirect one, one which will apply to all transactions, even loss making ones.
This strike on peasants, who constitute the most natural patriots of the country, has put a very heavy burden on them. The benefit will naturally go to big landlords, big grain traders, their agents and to foreign and Indian corporate.
Question arises on the demands that stem from this situation. The Govt. should extend the date for deposit of old notes till the end of the current sowing season immediately, it should issue new currency in adequate amount, it should start Govt. procurement of paddy in cash at the MSP, it should freely provide new KCCs to all peasants, it should waive all loans including KCC loans of all peasants including all loans of share croppers and agricultural labourers, it should provide for full freedom to common people to exchange currency and as in natural calamities, it should treat demonetization as a calamity on the peasants and provide interim relief at the rate of full crop compensation to peasants including share croppers and agricultural labour.
It should also be asked to openly declare the secret door it has made for the rich to exchange their old notes and also declare the names of all secret bank account holders abroad, all investors in India through the Mauritius route, all names in Panama papers, all holders of NPAs of Indian banks and hold enquiry into the unaccounted assets of all multiple property holders. That can be the only real attack on black money. Further an attack has to be launched on the creation of black money, foremost on the corruption.