Three Years On, From Farmers To Diamond Merchants, People Still Live With Horrors Of Demonetisation

The evening of November 8, 2016, is that moment in our lives where we can recall where we were exactly when Prime Minister Narendra Modi made the? announcement that made almost 80 per cent of India’s total currency in circulation invalid.

When reality bit hard, it was absolute chaos and pandemonium coursing through the nation as people were left running from one one ATM counter to withdraw their savings. Banks had long snaking queues of people standing with bundles of cash waiting to get the suddenly redundant currency exchanged.

Three years after the drastic move, the country has still not recovered from the shock of demonetisation.??

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Now, even after three years have passed, it is safe to say that the country has not recovered from demonetisation.??

India's backbone, farmers, were worst hit

One of the worst-hit sectors was agriculture. With the majority of small to medium farmers who make little profit from their produce suffered a massive blow. Most farmers found no takers for their crops, as free cash was unavailable. For others, there was no money to buy seeds or fertilizers for the next harvest.

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This meant an entire season's harvest either went unsold or was below the average yield. Even in 2019, the cash flow has reached pre-demonetisation levels. Spice growers in Kerala were also hit hard. Growers of cardamom, one of the most sought after spices were one of those suffering due to demonetization and the implementation of GST which followed. The entire system which depended on hard cash was caught off guard in November 2016.

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We spoke to a farmer based in Idukki, Kerala about how demonetisation affected him.

"I don't even want to be reminded about those days. There was so much panic all around. People did not know what was happening. We have daily auctions of cardamom and most of the buyers come from Tamil Nadu. It was all dealt in cash and after the note ban came into effect there was hardly anyone coming for the auctions as they had no money," George, a cardamom grower based in Idukki, Kerala.

Digital payment, where?

It was not just farmers that suffered, the entire economy of the region came to a standstill due to the shortage of cash. Even now, a majority chunk of the local population said people there prefer cash payments and not digital or payment to bank accounts in exchange for the spices.

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"We are not used to any payments other than cash and it is difficult for someone of my age to learn online banking. This is the case with most of the people I know. But the traders are only able to pay a certain portion of the price in cash even if we insist on full cash payment," he said.

He, however, admitted that unlike the past two years, the situation has improved and this year they got better prices compared to the previous years. This he said was due to the floods which destroyed a large portion of this year's crop.?

Diamonds lost the shine

Another industry that suffered massively due to demonetization was the diamond trade. This was especially felt in Surat, Gujarat the hub of the diamond industry. Like most others, they too had issues with unpaid bills and salaries for their employees. But what made the industry even vulnerable was the sudden spike for diamonds immediately after demonetization was announced.

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Many, who had black money, tried converting it into jewellery and thus inviting some unwarranted scrutiny. While most of the other sectors have recovered partly or fully, the diamond industry is still struggling, and that is mostly due to the implementation of GST. Today, several of the diamond polishing units have either been shut or are on the verge of closing down.?

Tourism back in business

While most of the other sectors have recovered partly or fully, the diamond industry is still struggling, and that is mostly due to the implementation of GST. Today several approx no. of the diamond polishing units have either been shut or are on the verge of closing down.?

Travel was another sector that was hit hard in the initial year but managed to recover quickly travel and tourism. Like others, those in the tourism sector too was left clueless in the initial days of demonetization. What followed the announcement on November 8 was a flurry of cancellation of holiday bookings including since people found themselves without cash for their much-awaited vacations.

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Unlike others, the travel and tourism sector was quick to recover and went back to being normal.

"The initial 2-3 months were bad. We had several big and small groups who had booked tour packages with us canceled, This is including some corporate clients," a Delhi based tour operator said.

Unlike others, the travel and tourism sector was quick to recover and went back to being normal. "People have to travel, be it for personal trips or for work. So after the initial slowdown business was back to normal for us. Unlike others, the travel and tourism industry was already digital payments ready, so the transformation too wasn't a big deal," he said.

Cash is the ultimate king

When demonetisation was announced, one of the main objectives was said to be turning India into a cashless economy. And in the initial days, payment wallets like Paytm, Freecharge, and Mobikwik did brisk business.

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The volume of the bank to bank transactions and card payments also saw an increase. But three years later, cash is back in business in India and digital transactions have taken a back seat. The currency in circulation had overtaken the pre-demonetisation levels in 2018 and it shows no signs of slowing down.

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Black money is here to stay

While the crux of the demonetisation process was to weed out black money from the Indian market. The result of demonetization left a lot to be desired in terms of recovery of said black money. Black money has made a comeback.? It has now reached a point where RBI has already stopped printing Rs 2000 notes as the high-value currency notes make it easier for hoarders.